Benefits: Thousands face £50 fine for errors

By Kevin Peachey
Personal finance reporter, BBC News

Image caption,
Similar fines exist for those who offer incorrect details in tax credit claims

Hundreds of thousands of people are expected to face fines of at least £50 for "preventable" errors in their benefits claims.

The government expects to levy more than £60m in these civil penalties in the next four years, it revealed in its welfare reform proposals.

Errors could include failure to inform the authorities of a change of address or a partner moving into their home.

A union called the plans "shameful" and "unnecessarily punitive".

Fraud and error

Chancellor George Osborne announced plans to introduce a civil penalty around the time of last October's Spending Review.

But finer details of the plans - including the amount the government expects to levy in fines - was detailed in its welfare reform proposals.

With an estimated £5bn lost a year to fraud and error in the welfare system, the government wants to put more emphasis on people taking "personal responsibility" for their claims.

So, from 2012, it plans to deduct at least £50 from benefits if errors were made that "could have reasonably been prevented".

"[The] £50 rate was determined as an appropriate starting point for the majority of benefit customers to encourage better care of their claim, with the option of increasing the civil penalty to up to £300," the proposals found.

These fines, which will be paid in addition to refunding any overpayments, will total £9m in 2012-13, the government predicts.

This will increase to £30.5m in 2014-15, which is the equivalent of fines at £50 for 610,000 people.

The proposals also reveal that the government assumes there will be very few appeals against these fines.

'Genuine mistakes'

The fines were being levied for negligence on the part of claimants, a Department for Work and Pensions (DWP) spokeswoman said.

Claimants entered into a contract when making their claim and were told that if their circumstances changed they must inform the authorities. Simply forgetting to get in touch if this happened was not enough to escape the fine.

"Customer error costs the taxpayer over £1bn per year. This is unacceptable. When a person makes a claim we go to great lengths to explain what information we need and why. It is right that we ask people to show due diligence when they are claiming money from the taxpayer," she said.

Peter Francis, head of welfare rights at Barnsley Council, has been giving advice for 25 years. He said the vast majority of errors by claimants were "a mixture of ignorance and mistakes".

He said that people who had been overpaid benefits always wanted them to be paid back.

"If pensioners, people of working age and disabled people find they are penalised for an error, this could be quite harsh," he said.

He explained that changes of circumstances were not always clear-cut. For example, when was a son or daughter who returned to their parents' home, because of a tiff with their partner, officially considered to be living there?

Many jobseekers who told Jobcentre Plus of their change of circumstances after finding work, but did not tell the council, could find they were mistakenly receiving some benefits they were not entitled to, he added.


Similar penalties of up to £300 are in place for those who fail to inform HM Revenue and Customs (HMRC), within a month, of a change in their circumstances that could affect their claim for tax credits.

But the proposal to extend this to other benefits has prompted an angry response from some groups.

The move was "shameful", according to a spokesman for the Public and Commercial Services Union (PCS), which represents staff in Jobcentre Plus offices.

He added that those staff could bear the brunt of people's "understandable frustration" if they were fined.

Citizen's Advice also called for simplification of the benefits system to reduce errors, rather than fines.

"If the government intends to impose a hefty financial penalty on claimants who make mistakes, it must put the same effort into getting its own house in order, and reduce the unacceptably high level of official error that can cause immense problems - and often hardship - for claimants," a spokeswoman for the charity said.

"Many errors are genuine mistakes resulting from the complexity of the system and misunderstanding the rules. Here is a risk that vulnerable people could be hit particularly hard by this plan.

"Part of the problem is the sheer complexity of the current benefits and tax credit systems. Simplifying the benefits system should help reduce the incidence of error."

The DWP said the introduction of Universal Credit would simplify the system.

The Citizen's Advice spokeswoman also said the proposals raised a number of questions about how it would be implemented.

"If claimants face a penalty of £50 for error, will they also be able to expect equivalent compensation for errors made by DWP and HMRC?" she said.

"Who will decide when a penalty should be imposed, what level of evidence will be required, and what right of appeal will claimants have?"

Lee Healey, managing director of benefit advisers IncomeMAX, said: "Fraud and failure to report changes of circumstances have long been an issue with the benefits and tax credits system and the government has had to think imaginatively about how to reduce fraud and ensure claimants meet their responsibilities.

"What the government has opted for is a clear system of penalties which can easily be communicated to the general public. Some questions remain. What systems will be in place to ensure genuine mistakes or exceptional circumstances do not get penalised by civic penalties?"

In a separate development, letters have started to land on the doorsteps of 12,000 self-employed people who are claiming tax credits.

HMRC teams have been examining tax credit awards being paid to the self-employed and are writing to any whose claims might not be genuine or accurate. They are asked to contact the department and supply evidence to support their claims.

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