Why the government can’t reclaim overpaid benefits

21 October 2009

Earlier this month the Court of Appeal ruled that the secretary of state for work and pensions cannot recover overpayments of social security benefits through the courts in cases where the claimant is not at fault.

The case was brought by the Child Poverty Action Group after the government wrote to over 65,000 claimants telling them it could take them to court at common law if they did not pay back benefit overpayments.

The benefits in question included income support, incapacity benefit, housing benefit, pension credit and the state pension – benefits that cost the taxpayer the most.

However, The Court of Appeal’s ruling means the government cannot write these letters to claimants in future.

This ruling is good news for some of the poorest people in our society as they are unlikely to have the means to repay the sums back.

Had the Department for Work and Pensions won the case, then the government would have stopped benefit payments to all the individuals who had been overpaid until it had recovered the amounts - this would have caused considerable hardship and misery.

But it also means that taxpayers will pick up the bill for the incompetence of the bureaucrats at the Department of Work and Pensions. And it’s likely to be a hefty bill at that - auditors claim £900 million was overpaid last year alone.

Another important point to note is that the ruling does not affect overpayments of tax credits. However, the Child Poverty Action Group has a separate campaign on this issue, which you can find out more about on its website.