Advance payments of universal credit (UC) are the main official response to the long waiting time before payment of UC begins. But advance payments are recoverable by deduction from subsequent payments. What are the relevant rules, and are they being correctly applied? Lynsey Dalton takes a look.
The coronavirus pandemic and consequent lockdown restrictions have led to a sharp increase in UC claims, with 3.1 million new claims made since 16 March. Many of these new claimants will not have had any savings to rely on and will have had no option but to request an advance payment to cover their outgoings during the five-week waiting period between making the claim and receiving their first UC payment. The latest statistics show that 1,032,830 new claim and benefit transfer advances have been paid since 16 March.
Many advisers will be aware that the DWP’s policy is that an advance payment should be recovered within 12 months, extending to 15 months where there is hardship. The amount that can be paid is calculated by multiplying 30 per cent of the standard allowance, which is the monthly rate at which the DWP recovers the advance, by 12, the standard recovery time. The first issue that this creates is that the amount paid does not take into account a family’s needs. A single person with no children would receive the same advance as a single parent with four children, as the claimants’ standard allowances are the same. This can result in larger families struggling to get by during the first five weeks.
The longer term issue is that the high rate of recovery set by the DWP often causes hardship and, on correct reading of the regulations, is unlawful.
Rates of deduction
Recovery of amounts from UC is dealt with in regulation 11 of the Social Security (Overpayments and Recovery) Regulations 2013 No.384 (the ‘SS (OR) Regs’). Regulation 11(2) lists the three rates of deduction, based on the client’s circumstances, which are explained in regulation 11(3) and (4). The rates are as follows:
•40 per cent of the standard allowance (now 30 per cent in practice) in cases of hardship payments or where the claimant has been found guilty of, or admitted to an offence, or has agreed to pay a penalty;
•25 per cent of the standard allowance where the payments are deducted from earned income;
•15 per cent of the standard allowance in all other cases.
Unless the claimant is working or the recovery is for hardship payments or an overpayment involving fraud, the rate of recovery should therefore be 15 per cent of the standard allowance, and the DWP’s practice of recovering advance payments at a rate of 30 per cent as standard is unlawful.
CPAG has raised this issue with the DWP in pre-action correspondence, with a view to making a claim for judicial review of its use of higher rates of recovery. In its response, the DWP stated that advance payments are not ‘recovered’ under regulation 11 of the SS(OR) Regs but, rather, are offset against payments of benefit under regulation 10 of the Social Security (Payments on Account of Benefits) Regulations 2013 No.383 (the ‘PAB Regs’), which reads as follows:
‘10. Where it is practicable to do so, a payment on account of benefit—
(a) which was made in anticipation of an award of benefit, is to be offset by the Secretary of State against the sum payable to A under the award of benefit on account of which it was made;
(b) whether or not made in anticipation of an award, which is not offset under paragraph (a), is to be deducted by the Secretary of State from—
(i) the sum payable to A under the award of benefit on account of which it was made; or
(ii) any sum payable under any subsequent award of that benefit to A.’
The DWP’s position is that offsetting under regulation 10 PAB of the Regs is ‘completely different’ to deducting under regulation 11 SS(OR) Regs, and that there is no maximum rate of recovery under the PAB Regs, as the off-setting is agreed in advance with the claimant.
CPAG does not agree with this interpretation of the regulations. Offsetting is the recovery of a payment from the arrears of benefit owed at the start of a claim. This is the way that the term is used elsewhere in social security legislation1See reg 98 Housing Benefit Regulations 2006 and reg 3 Social Security (Payments on Account, Overpayments and Recovery) Regulations 1988
and so the DWP’s position that offsetting can be against multiple payments does not align with the accepted meaning. Regulation 10(a) itself refers to ‘the sum
payable to A under the award of benefit’ (emphasis added). This suggests a single offsetting against a single payment, and is distinct from the wording used in 10(b), of ‘any
sum payable under any subsequent
award of that benefit’(emphasis added).
Further, regulation 10 draws a distinction between circumstances in regulation 10(a), where a payment is made in anticipation of an award, and is then offset against the sum paid to the claimant, and 10(b) where a payment is made, regardless of whether that payment was made in anticipation of an award, and is deducted from either the initial sum paid to the claimant – ie, the first benefit payment, or any subsequent payment of that benefit. If the DWP’s interpretation of the legislation is correct, and any payment on account can be off-set against any subsequent payments, all would be covered by 10(a) and so 10(b) would
not be necessary.
CPAG’s interpretation is that the payment on account can be ‘offset’ against the first, but not subsequent, payment of benefit under regulation 10(a). This offset could be the whole amount of the advance payment, as long as this does not exceed the first payment of benefit. However, the inclusion of the words ‘where it is practicable to do so’, indicates that the claimant must be left with sufficient funds to meet her/his needs. The DWP’s approach to other deductions suggests that a maximum of 30 per cent of the standard allowance should be offset against the first payment only.
Any subsequent recovery is not an offset, but a ‘deduction’ under regulation 10(b)(ii). There is, therefore, no reason that it should not be subject to the maximum deduction rates set out in regulation 11 of the SS(OR) Regs, and the rate should therefore be a maximum of 15 per cent of the standard allowance.
CPAG has exchanged pre-action correspondence with the DWP in respect of this matter, but unfortunately we were not able to proceed to a judicial review claim in that case. If you are assisting a client who was given an advance payment at the start of her/his claim, and who is now repaying that payment at a rate of 30 per cent of her/his standard allowance, please get in touch. We are looking for suitable clients to take this action forward. Email LDalton@cpag.org.uk if you have a suitable case.