An investigation into DWP’s handling of migration to Employment and Support Allowance

Ms U’s case

9. In May 2012 Ms U, who had been getting incapacity benefit, moved to ESA. She received only the contributions-related part. In July 2017 her representative (a welfare rights adviser) prompted her to have her entitlement reassessed. In August DWP reassessed and paid her £19,832.55 arrears of income-related ESA and premium payments (about £80 a week).

10. In November Ms U’s representative complained to DWP that Ms U had been living in hardship because for a sustained period she had had to live on less than the state said she should have. He said she was very vulnerable. He said she had missed out on additional support (‘passported benefits’) that an award of incomerelated ESA would have made available. He cited prescriptions, and said Ms U needed medication in order to stay well and remain in the community and had had to pay for it herself, and a warm home discount payment of £140 she had received in 2017 but not from 2012 to 2016. Her representative said she had missed out on other help such as paying for a washing machine. He asked for compensation.

11. In February 2018 DWP told Ms U that compensation was not appropriate in ‘cases where the claim has been reconsidered’. The same month her representative asked DWP to reconsider the decision.

12. In April DWP staff noted colleagues had drafted a submission regarding compensating people affected by the migration to the Minister for Disabled People (the Minister). The 4 May submission to the Minister (the Submission) said DWP was conducting the LEAP exercise. It said ‘This submission provides advice on whether further redress by way of a special payment in addition to the payment of arrears may be appropriate.’ The Submission said it had considered DWP’s special payments scheme and noted it was discretionary.

The Submission set out three options:

  • Option 1 - no further financial redress;
  • Option 2 - automatic payment of interest as part of the LEAP exercise [which the submission estimated would cost about £4 million]; and,

13. Option 3 - automatic payment of interest as part of the LEAP exercise with any additional claims for actual financial loss and/or consolatory payment to be considered as usual by the Special Payments Team’.

14. The Submission recommended option one ‘for the following reasons: we are undertaking a LEAP exercise and as we intend to repay appropriate ESA arrears and have already corrected our processes, we consider further redress by way of a special payment is not appropriate; payment to cases in this LEAP exercise may set a precedent for future LEAP exercises…; and, further redress would cause additional…costs’.

15. The Submission said the special payment scheme was based on guiding principles (which we assume are DWP’s Special Payment Scheme: Policy and Guiding Principles April 2012 set out below). It said it would be ‘feasible to award a special payment to reflect actual financial loss…consolatory payments may also be appropriate where maladministration has had a serious and significant non-financial impact which has affected the claimant’s wellbeing… To be sure of this type of impact, we would need to ask each individual claimant’.

16. The Submission said option three would have ‘unquantifiable’ costs. It said extra‑statutory special payments where a customer had lost statutory entitlement to a benefit due to maladministration were met from the benefit budget. Other special payments were paid from the local administration budget.

17. The Submission highlighted that DWP’s special payments guidance included that ‘There are a variety of forms of redress of which financial is only one – for example an apology, correction of the original error, an undertaking to improve procedures/systems, or a combination of these’. It said ‘as we are undertaking a LEAP exercise to correct any original error and have corrected our processes, further redress by way of a special payment is not appropriate’.

18. On 14 May DWP noted the Minister (and Secretary of State) ‘agreed to the recommendation…and [to] make no special payments’. On 16 May DWP noted ‘having discussed the issue with the Minister, it has been agreed that they will not be making special payments on these cases’.

19. DWP sent an internal summary of ‘lines to take’ on requests for compensation:

  • ‘We intend to repay ESA arrears where appropriate and have already corrected our processes. We consider further redress by way of a discretionary special payment is not appropriate.
  • ‘Claimants with a low income in receipt of contributory ESA, could have applied for income-related ESA at any time.
  • ‘At no point have we actually stopped individuals from making a claim to income‑related benefits.
  • ‘Eligibility for passported benefits such as help with health costs are determined by the relevant Department.’

20. On 21 May the Public Accounts Select Committee (the Committee) heard oral evidence from the DWP Permanent Secretary as part of an investigation into ESA. When asked about compensation for people adversely affected by the migration, he said ‘We are not introducing a blanket compensation scheme’.

21. In July the Committee published a report. It said DWP arrangements for transferring people to ESA were fundamentally flawed and implemented without basic checks. It said that as a result 70,000 vulnerable people were underpaid for years. It said the average underpayment was about £5,000. It said DWP did not seek legal advice to make sure the administrative process it planned complied with its own regulations. The Committee said DWP accepted that was wrong and should not have happened. It said DWP ‘accepted that its letters did not make clear that people could be substantially better off if they were also entitled to ESA on income grounds’ and ‘Without this information, there is no reason why claimants would necessarily have known why it was important to contact the Department about their benefits. The Committee said it understood from welfare rights advisers that some people had been fined by the NHS ‘for claiming passported benefits they thought they were entitled to’. The report recommended DWP ‘calculate the total amount of money claimants had missed out on, including passported benefits, and report back to the Committee by end October 2018 on what it will do to ensure claimants receive appropriate remedies’.

22. In August Ms U’s representative chased a response to his February complaint. DWP responded the same month and said it had declined to make a payment, and used the ‘lines to take’. As well, DWP said Ms U could not complain to the last stage of its complaints procedure (the Independent Case Examiner) and did not tell her about the Ombudsman.

23. In October DWP responded to the Committee’s recommendations. It said it had assigned staff to work out and pay arrears to those affected (i.e. the LEAP exercise). On the recommendation that DWP calculate the value of missed passported benefits, DWP said it ‘does not consider it practical to implement….Every case will be different, and the Department would need claimants to submit evidence of their eligibility and in some cases evidence of their actual expenditure’. The Committee said it was disappointed because although DWP said it agreed with the recommendation, it planned to pay out only arrears: ‘We referred to compensation for wider losses’.

24. On 21 December DWP’s Permanent Secretary wrote to the Committee. On passported support, he said ‘my officials have been engaging with a number of the authorities who are responsible for passported benefits, to see if a way forward can be found’. DWP told us staff were engaged with authorities responsible for passported benefits to support them when considering the impact of the ESA underpayment exercise and passported benefits.

25. In August 2020 DWP said Ms U sought and was paid arrears before its LEAP exercise and accepted that the Minister’s 2018 decision applied only to cases dealt with under that exercise. DWP referred Ms U’s case to its special payment team. The special payment decision included the comment that ‘the Minister’s steer’ was ‘we should pay the arrears but not any special payments’. It said ‘DWP’s failure to look at ESA(IR) entitlement as well as ESA(C) is accepted as maladministration’. It said the effect of what happened was ‘The reduced income since 2012 has meant that she had an income lower than the government says someone in her circumstances needs to live on for a sustained period of time’. However, the decision was ‘though this case was cleared before the LEAP exercise started and the ministerial steer cannot be used to refuse a Special Payment, I believe the rationale behind the steer still applies’. It summarised DWP’s ‘lines to take’.