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Complaints, Health, Human rights/equalities, Initial decision-making, Ombuds and reviewers, Reports & Publications, Social security and welfare benefits

The DWP’s Handling of the Migration of Disability Benefit Claimants to Employment and Support Allowance: The DWP’s Response to the Report of the Parliamentary and Health Service Ombudsman (Part 1)

By Robert Thomas (University of Manchester)

In January 2022, the Parliamentary and Health Service Ombudsman (PHSO) published its report into the handling, by the Department for Work and Pensions (DWP), of the migration of a disability benefit claimant, Mrs U, to Employment and Support Allowance (ESA). More specifically, the key issues are: (a) whether the DWP’s refusal to consider Mrs U’s claim for compensation was flawed by maladministration; and (b) whether the DWP should proactively consider whether other people in Mrs U’s position should also be compensated.

The PHSO’s report was presented to Parliament so that it would attract the attention of parliamentarians. After detailing the background of the episode and the PHSO’s report, this blog considers whether or not the DWP has provided adequate and cogent reasons for not accepting the core recommendation made by the PHSO, namely, that the DWP ought to adopt a proactive approach to remedy the financial and non-financial losses caused to the approximately 118,000 other people affected by their flawed migration by the DWP to ESA. The blog also considers some of the wider lessons from this episode about government and administrative justice.

The PHSO’s Report

When Mrs U’s disability benefits were migrated or converted from Incapacity Benefit to ESA in 2012, the DWP made a mistake: it failed to pay her the income-related component of ESA between May 2012 to August 2017, a period of over five years. Mrs U complained that the DWP had failed to compensate her for the impact of these failings and how they had affected her life. This was not a one-off mistake; it was a system-wide error that affected many other people.

ESA was introduced in the early 2010s as the principal disability benefit paid to people who have limited capability to work. It replaced an earlier benefit, Incapacity Benefit (IB). In the early 2010s, claimants on IB were migrated or converted to ESA. Given the volume of cases involved and the complexity of the rules, this was a large and complex project for the DWP to undertake. However, over time, it became apparent that the department’s migration of disability benefit claimants had been flawed. In 2018, both the National Audit Office and the House of Commons Public Accounts Committee (PAC) concluded that, when the DWP converted or migrated claimants to ESA, it had committed a major error. Tens of thousands of people had been underpaid their benefit entitlements because they had been awarded ESA on the basis of their national insurance contributions only whereas, in fact, they had also been entitled to ESA on the basis of their income (income-related ESA). Meg Hiller, chair of the PAC, explained that she was ‘was appalled by the Department’s apparent indifference to correcting its mistakes. Over several years the Department failed to act on information and intelligence from its own front line that the ESA transfer process was not working correctly’.

People who were unpaid ESA were also adversely affected in other ways. Consider the case of Mrs U. She had, for over five years, been forced to live on around half the amount of money that the Government says is the minimum requirement for a person with severe disability to live on. Mrs U has Graves’ disease, an autoimmune condition by which a person’s immune system mistakenly attacks their thyroid causing it to become overactive. Symptoms include: weight loss, despite an increased appetite; rapid or irregular heartbeat; nervousness, irritability, trouble sleeping, or fatigue; shaky hands or muscle weakness; sweating or trouble tolerating heat; and/or frequent bowel movements.

Diet was an important part of Mrs U’s condition. She needed to buy appropriate food in order to maintain a healthy diet. Mrs U also needed to heat her home. She also urgently needed dental treatment. However, Mrs U was unable to do any of these ordinary, but essential things. She was unable to buy appropriate food, heat her home, or access dental treatment. Nor did she receive ‘passported’ benefits; free NHS prescriptions or the £700 warm home discount. Because Mrs U was unable to heat her home, she was at risk of hypothermia and this affected her arthritis. The situation lasted for over five years. During this period, Mrs U’s mental health suffered. She became depressed because of her situation. He hair fell out. She lost weight. Her health markedly deteriorated.

Fortunately, Mrs U had the assistance of a representative, a welfare rights adviser, who helped her with her case. The representative supported Mrs U to complain to the DWP and then to the PHSO. As noted above, Mrs U’s complaint was that she be paid the ESA payments that she should have received. The second part of her complaint was that she should be compensated for having been forced, because of the DWP’s error, to have lived in considerable hardship for a prolonged period of time. The DWP paid Mrs U her benefit arrears (although not the interest on them).

However, the DWP rejected paying Mrs U compensation for the harm and distress she had experienced as a result being underpaid her benefits. The issue of compensation was evidently an important matter for the department. As the PHSO’s explains, civil servants had wanted ministers to clarify their views on whether to compensate people who had suffered injustice as a regard of the flawed ESA migration. The submission to ministers had set out various options and recommended that ministers agree to a blanket policy of not providing any further financial redress for people in Mrs U’s situation (other than the payment of their underpaid benefits). On 14 May 2018, the then Minister, Sarah Newton MP, agreed to the recommendation not to make special payments – compensation – to affected people.

The PHSO found that the DWP’s decision to adopt a blanket policy of not making special payments – or compensation – amounted to maladministration. The blanket policy not to compensate people was inconsistent with the PHSO’s ‘Principles for Remedy’. These principles require that the remedies used by public bodies be flexible and enable the public body concerned to consider fully the circumstances of the individual’s situation. By contrast, the DWP’s position ruled out compensatory payments without considering the facts and circumstances of individual cases and the impact of its error and without obtaining and considering relevant evidence from the claimant. This approach meant that the DWP had undermined a key principle that the DWP itself had adopted, namely: individuals should not be disadvantaged as a result of administrative failures.

The PHSO had then found maladministration by the DWP. The DWP accepted this finding: its blanket policy of refusing compensation to Mrs U and all other similarly placed people had been wrong. The blanket nature of this policy not to compensate Mrs U was flawed on the basis that it determined the outcome of complaints, before they had been considered on their own merits. It was akin to the department fettering its discretion. Accordingly, the DWP had to compensate Mrs U. The PHSO recommended that Mrs U receive £7,500 from the DWP. The DWP later paid this amount to Mrs U. This amount was in addition to Mrs U’s benefit that the DWP had failed to pay her.

Pausing here, it is worth noting that civil servants had written a submission to ministers who had then approved a general policy to deny affected people compensation for the department’s failure. This policy was then found by the PHSO to have been contrary to the department’s own guidance on complaint-handling, which required that each case should be considered on its own individual merits. This provides one insight into the initial handling of complaints within government. Anyone in Mrs U’s position had their claims for compensation defeated at the outset and without having their specific circumstances considered. How many other such policies exist that stifle complaints at the outset? We do not know.

A related point is that, as an exercise in government policy-making, the development and adoption of the blanket policy can only be described as a failure. The PHSO found the policy to have been flawed by maladministration. But there are other related aspects to note. For instance, it is not apparent that the submission prepared by civil servants and sent to the minister for a decision made any reference to the DWP’s own guidance on special payments or the PHSO’s Principles of Good Administration and Principles for Remedy. If so, then the minister would not have been not fully informed about the relevant factors to be considered. It is well-established that decision-makers should take into account all relevant considerations when making decisions. It is elementary that such considerations include relevant guidance.

But what of all the other people who, like Mrs U, had been wrongly migrated to ESA and not received their full benefit payments? Would they be compensated?

This is the central issue in the tussle between the DWP and the PHSO. If ombuds are to exert influence over government, then they cannot be limited solely to considering individual complaints one at a time. They need to be focused – as indeed they are – upon correcting and improving the underlying policies and systems which lead to individual cases of maladministration.

In this respect, the PHSO recommended that the DWP should consider whether to remedy all those people who suffered an injustice as a result of the maladministration it had identified. The number of people affected was large: over 118,000. However, when placed within the much wider context of benefits delivery, this number is far from exceptional. The DWP is the UK’s largest public service delivery department. It interacts with millions of people. Indeed, it is virtually impossible for anyone to have no contact or interaction with the DWP in some way or other. In the narrower context of ESA payments, this number of affected people – over 118,000 – is not at all exceptional given the number of claimants.

According to the PHSO’s Principles for Remedy, even when a remedy is not legally required, the public body should consider whether it has acted fairly and how its decisions have affected: both the complainant and, where appropriate, other people who have suffered injustice or hardship as a result of the same maladministration or poor service. Therefore, if other people have, like Mrs U, suffered injustice following the flawed migration to ESA, then it only seems right and proper that their cases should be similarly considered for compensation. After all, it is highly likely that other people may well have suffered from the same adverse effects as Mrs U.

More specifically, the PHSO made three recommendations. First, that the DWP state what action it would take to remedy the financial and non-financial losses caused to people who had been adversely affected by the migration and had not been included in the corrective ‘LEAP’ exercise. Second, that the DWP reconsider its decision to rule out compensating people included in the corrective ‘LEAP’ exercise for financial and non-financial losses and do so in a way consistent with its own and the PHSO’s relevant guidance. Third, that the DWP report to the parliamentary select committees on its progress and what the decisions it made about how to remedy its failings.

The DWP’s response to the PHSO’s report

The DWP’s negative response to the PHSO’s report was largely prefigured in the report itself. The PHSO noted that the DWP did not agree with its recommendation to compensate other people affected by the same error:

It [the DWP] says the unfortunate handling of Ms U’s case was a simple misunderstanding and there is no evidence that other non-LEAP exercise claimants were affected. If Ms U’s decisions were typical, DWP will have declined to make others special payments on wrongly applied grounds, will have told them they could not complain to its Independent Case Examiner and will not have told them about the Ombudsman. That means that likely routes for such evidence were closed off. As well, among the papers DWP sent the Ombudsman were internal messages where staff were seeking guidance on ‘conversion to ESA’ and were told ‘a decision has been made in relation to special payments for IBR/ESA conversion cases…Ministers have stated no special payments will be made’. DWP special payments staff said during the investigation ‘We have never paid compensation for these cases’. None of that communication drew a distinction between LEAP and non-LEAP exercise claimants.

The DWP also stated that its special payment scheme applied to redress for the impact of maladministration on an individual and not to large-scale corrective exercises – LEAP exercises – aimed at correcting cases and paying people the right amount of benefits. The department also referred to the guidance from HM Treasury, ‘Managing Public Money’, which states that departments should not create precedents that put the taxpayer at risk to support its approach.

The PHSO noted that it was extremely disappointed that while the DWP had accepted that it had engaged in maladministration, it had not accepted the recommendations ‘to do something proactive about others it knows must be in the same position as Mrs U’.

The matter was then discussed in the House of Commons on 13 January 2022. On the issue of compensation, the Minister, David Rutley MP, said:

We only received the report this morning—it has only just been published—so we will consider it and review its recommendations, as is entirely right. We would also say that if people believe they should have further compensation and want to contact us at DWP, they can contact us through the various helplines that have been set up. There is a team working specifically on this broad issue, and if they prefer, they can go through the complaints process, so those avenues are available to those individuals. In these situations, we are typically not compelled to come forward with compensation payments, but we will consider the wider points and the views put forward by the report.

A number of MPs – including Jonathan Ashworth MP, Stephen Timms MP (chair of the House of Commons Work and Pensions Committee) and Andrew Gwynne MP – raised the issue of compensation for other people adversely affected by the department’s flawed migration of ESA claims.

Stephen Timms MP stated that ‘the ombudsman found that these failings had had a severe effect on Ms U’s existing mental and physical health problems, and no doubt the same is true for quite a number of the other 118,000 people affected. Will the Department work out, proactively, who should be receiving compensation?’ Similarly, Alan Brown MP stated that it was ‘outrageous that it has taken the ombudsman to determine that compensation is due to the 118,000 claimants underpaid for up to seven years. Of course, people should be paid compensation for having been forced to live in poverty, so what are the timescales for providing justice to those claimants?’ Bob Blackman MP highlighted the ‘incredibly complicated’ nature of the benefits system and raised the point whether the Minister would ‘bear in mind the need to ensure that the system is straightforward, that people can understand it, and that people are paid the compensation and the benefits they are due? We are talking about the most vulnerable members of society’. Andrew Gwyne MP asked: ‘Why is the onus on individuals to come forward to the DWP? Why is [the DWP] not being proactive in going out to the individuals who are affected? That seems like common sense to me’.

The Minister’s response on the matter of compensation was simply to repeat the department’s mantra: ‘there are mechanisms for those who feel they have grounds for further compensation to get in touch with the Department’.

The matter was also discussed in the House of Lords on 18 January 2022. The Minister in the Lords, Baroness Stedman-Scott, stated that the DWP ‘has a discretionary scheme that allows special payments to be made to customers to address any hardship or injustice caused by DWP maladministration. Consistent with other large-scale LEAP exercises, special payments under the DWP discretionary scheme will not routinely be made. There is no legal requirement to make special payments as the scheme is discretionary’.

In response, a number of Lords raised points about whether the DWP would take a proactive approach toward other people. Baroness Janke said that Mrs U had ‘suffered appallingly through maladministration’:

The Minister did not really address the point about compensation, which the ombudsman’s report specifically asked the DWP to reconsider. Would she look at that again and perhaps come back to us on it? The report also points out that the DWP has put aside its own guidance in the remedy it is offering—so it does seem that the DWP needs to look at this report again.

Baroness Sherlock mentioned that very many other people had been affected. Therefore, would the Minister come back to the House with a considered response from the DWP to the recommendations in the ombudsman’s report? Lord Cormack asked the Minister: ‘should it not be axiomatic that where somebody suffers as a result of maladministration there is automatically compensation? … we must have compensation if maladministration is the cause of suffering’. Similarly, Baroness Drake asked: ‘In the face of that clear statement from the ombudsman, how can the Government continue to refuse to commit to paying compensation to all other victims of the same maladministration?’

In response, Baroness Stedman-Scott noted that ‘the department needs to respond to the PHSO. When it does that, I am sure that the whole House will be made aware’. She further noted that she understood ‘completely the situation and the depth of feeling about compensation for others, and I have to leave that to the Minister for Welfare Delivery and others in the department to consider’.

The DWP’s Formal Response

On 11 April 2022, the DWP formally responded to the PHSO’s report. Peter Schofield, the DWP’s Permanent Secretary, wrote to the PHSO providing the department’s response to the PHSO’s report and recommendations. Contrary to the view of Baroness Stedman-Scott that Parliament would be made aware of the department’s response, the DWP’s letter has not been published. Nor has there been any written or oral statement to Parliament. However, a copy of the DWP’s response has been obtained through a FOI request. The letter addresses each of the PHSO’s three recommendations in turn.

As regards the PHSO’s first recommendation – that the DWP state what action it would take to remedy the financial and non-financial losses caused to those people who had been adversely affected by the migration not included in the LEAP exercise – the DWP’s response was:

Since the Department commenced an exercise to review these cases in December 2017, we have reviewed around 600,000 cases and made 118,000 arrears payments, totalling £613 million pounds.

There is no evidence of a systemic issue whereby those cases dealt with outside the LEAP exercise were unable to access the Department’s Special Payment scheme at the time they were corrected. These cases would have been considered under the DWP Special Payment guidance as that was the only guidance in place at that time. Staff would have had no knowledge of a future LEAP exercise. Claimants who believe they wrongly missed out on a consolatory payment can ask for their case to be reviewed at any time. Given this, I think we have addressed this recommendation.

In response to the PHSO’s second recommendation – that the DWP reconsider its decision to rule out compensating people included in the LEAP exercise for financial and non-financial losses and do so in a way consistent with its own and the PHSO’s relevant guidance – the DWP was ‘unable to agree that the Department’s Special Payment scheme should always apply to corrective exercises’.

This was because the scheme applied to redress for the impact of maladministration on an individual. When considering large scale corrective exercises such as LEAP exercises, decisions on redress must take account of the principles set out in Managing Public Money; they must not create precedents that put the taxpayer at risk and should not apply a blanket decision that applies to all cases. The main thrust of such LEAP exercises was to correct the cases and pay the right amount of benefit to all those who had been affected. The DWP’s Permanent Secretary had responded to the decision not to pay further redress to cases corrected by this exercise before the House of Commons Public Accounts Committee (PAC) in May 2018. At that hearing, the Permanent Secretary had said that the decision took account of the Department’s Special Payment Scheme and HM Treasury’s Managing Public Money, and this explanation still applied. If a claimant feels that they should receive compensation due to their individual circumstances, they could contact the department and set out their reasons. All such requests received would be considered on a case-by-case basis.

In response to the PHSO’s third recommendation – that the DWP report to parliamentary select committees on its progress and what the decisions it made about how to remedy its failings – the DWP had sent a copy of its letter to the House of Commons Work and Pensions Select Committee and the House of Commons Public Administration and Constitutional Affairs and Public Accounts Select Committees. The next part of this blog will consider whether the DWP has given adequate and cogent reasons for rejecting the PHSO’s recommendations.

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