Following judicial review, the DWP accepts it must pay up to an extra £150,000,000 to correct ESA errors in up to 70,000 cases

18 July 2018

Between 2011 and 2017 the Department of Work and Pensions (DWP) underpaid more than £450,000,000 in means-tested benefits, due to its mishandling of the process by which claimants were moved from incapacity benefit to employment and support allowance. When announcing its plans to remedy those underpayments on 14th December 2017, the DWP claimed the law ‘barred’ it from paying claimants any underpayments arising before 21st October 2014. That would have had two serious effects: first, up to £150,000,000 of the underpaid benefit would have been kept by the government instead of passed to claimants; and second, any arrears which were paid to claimants could after 52 weeks have been treated as ‘capital’, and reduced or stopped their ongoing entitlement to benefit.

In March 2018 the Child Poverty Action Group, acting for one affected claimant, brought judicial review proceedings in R (Smith) v Secretary of State for Work and Pensions JR/1249/2018 arguing that the DWP’s position was unlawful.

The DWP has today accepted that it got the law wrong. It was never ‘barred’ from repaying the full arrears. The DWP says it will now start making those payments.

Garden Court North Chambers’ Tom Royston, led by Richard Drabble QC, acted for the Claimant, instructed by the Child Poverty Action Group. James Eadie QC and Zoe Leventhal acted for the Defendant, instructed by the Government Legal Department.

Tom has provided the following commentary on the matter:

Why did the legal action have to be brought?

It was necessary to take legal action against the government because it said it had no legal power to fully remedy the consequences of a major error it had made in transferring claimants from incapacity benefit to employment and support allowance.

Why is this development important?

The DWP’s announcement is important for three reasons:

  • First, it means that an extra £100 to £150m will be paid to ill and disabled people on very low incomes.
  • Second, it means that the whole of the £450 to £500m arrears to be paid will be exempt from being taken back off claimants as excess ‘capital’ while their ESA awards continue.
  • Third, the DWP now appears to accept that it cannot lawfully rely on section 27 Social Security Act 1998 to limit arrears arising from a past error merely because a court case has subsequently discussed the issues relating to that error. That acceptance may result in claimants receiving substantially more arrears when errors are discovered in future.

When will claimants be paid?

The government says claimants will be paid the amount they are owed by April 2019. Claimants who have already been paid some arrears who were transferred to ESA before 21st October 2014 may, as a result of today’s announcement, now be due further arrears.

Where is the Court’s decision?

The Upper Tribunal has not yet issued a decision in this case. There was due to be a hearing before a panel of three judges over two days in October 2018, and a decision would have followed that hearing. However, in the light of the DWP’s new position, it is likely that a formal decision will be made before that date, possibly in the next few days.

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