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DEPARTMENT OF SOCIAL SECURITY
12. Case No. C.931/99
Benefits Agency: misdirection causing loss of entitlement to adult dependency increase
12.1. Mr B complained that when his wife visited the Benefits Agency's (BA's) local office in January 1997 to inform them of an impending increase in her weekly earnings, they had failed to inform her of changes that had taken place with effect from the previous November to the way in which BA calculated the net earnings of claimants and their dependants for benefit purposes. He said that they had misled his wife into believing that her increased earnings were still below the earnings limit. That was not the case and Mr B lost entitlement to an adult dependency increase.
12.2. My investigation began once the Ombudsman had obtained comments from the Chief Executive of BA. I have not put into this report every detail investigated by the Ombudsman's staff; but I am satisfied that no matter of significance has been overlooked. An annex to this report sets out the main events in this case. The annex is based on an account of events given by the Chief Executive, but I have expanded the Chief Executive's account in a few areas based on the results of my examination of the department's papers.
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Background
12.3. Invalidity benefit was a contributory benefit payable to those who were unable to work because of illness or disability. Increases known as adult dependency increases could be paid for a spouse (or other adult dependent). Invalidity benefit was replaced on 13 April 1995 by incapacity benefit. Under the incapacity benefit regulations an adult dependency increase could not be paid for a spouse under the age of 60 years unless the applicant had a dependent child. However, under transitional protection arrangements, any existing entitlement to an adult dependency increase could be retained if the claimant had been paid an adult dependency increase at any time in the 56 days immediately before 13 April 1995. That transitional protection was lost for good if the adult dependency increase was not payable for a continuous period of 57 or more days. Under the regulations governing incapacity benefit, payments of adult dependency increases (both to those who had previously received invalidity benefit and to those who had not) are subject to a limit on earnings. For the purposes of that limit BA calculate earnings over a past period, and if the limit is exceeded the adult dependency increase is removed. In such circumstances it is open to the claimant to reapply for the adult dependency increase if the earnings position changes. An adult dependency increase is not payable if the spouse is in receipt of an "overlapping" benefit paid at a rate that is the same as, or greater than, the adult dependency increase.
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12.4. Invalid care allowance is payable to those who are caring for a disabled person, where the disabled person is receiving attendance allowance or the middle or highest rate care component of disability living allowance. It is regarded as an "overlapping" benefit for the purposes of determining eligibility to an adult dependency increase.
12.5. On 25 November 1996 new regulations came into force which changed the way in which BA calculated the net earnings of claimants and their dependants for benefit purposes. The change was intended to simplify administration and to achieve consistency in the treatment of earnings where a claimant applied for more than one benefit. Most work related-expenses such as fares to work and meals at work were no longer treated as deductible in the calculation of net weekly earnings. The internal guidance issued to BA staff said that the new rules should be applied to earnings from the first benefit week beginning on or after 25 November. (That was the week beginning 28 November.) The guidance said that claimants would continue to benefit from any transitional protection afforded them under the earlier arrangements for converting invalidity benefit to incapacity benefit, unless the application of the new rules resulted in a break in payment of 57 days or more.
12.6. Before the new earnings rules came into effect BA told the Social Security Advisory Committee that to warn individual claimants about the new rules would not be possible without incurring disproportionate cost. However, BA agreed to include information about the changes in their quarterly publication "Touchbase" sent to about 90,000 benefit advisers. The Parliamentary answer which announced the new Regulations on 30 October 1996 said that in a small number of cases the changes might result in either benefit loss or gain.
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Jurisdiction
12.7. Claims to invalidity benefit are dealt with by BA's local offices and decided by adjudication officers whose decisions carry a right of appeal to a Social Security Appeal Tribunal and ultimately, on a point of law, to a Social Security Commissioner. The Ombudsman is generally debarred from investigating any action in respect of which a person has, or had, such a right of appeal. Where that right has been exercised, the bar to his investigation is absolute. The Ombudsman is precluded from questioning the merits of a discretionary decision taken without maladministration by a body within his jurisdiction. My report is concerned only with administrative actions of BA in their handling of Mr B's case.
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BA's response to the complaint
12.8. In his comments to the Ombudsman on the complaint the Chief Executive said that the new regulations in 1996 had not contained any provisions regarding transitional protection. There had been no "feasible operational" way of identifying, either before the regulations came into force or within the subsequent 57 day period, the minority of claimants who were affected by the change. He said that when the regulations had come into force BA had taken a decision not to trawl through the hundreds of thousands of incapacity benefit cases where an adult dependency increase was payable. Instead BA offices had been required to identify relevant cases when carrying out yearly reviews or when a change of circumstances had arisen.
12.9. The Chief Executive said that when the local office had received Mr B's allegation of misdirection they should have referred the papers to BA's special payments unit for them to consider whether misdirection had occurred. He apologised for that oversight. He acknowledged that had Mrs B, when she had notified BA in January 1997 of the impending change to her earnings, been informed about the change to the regulations that had become effective in November 1996 she could have taken steps to secure continuing entitlement to an adult dependency increase. The Chief Executive said that consideration had been given to the question of misdirection. From their documentation BA had confirmed that Mr B had kept them informed of changes to his wife's working pattern. BA had also confirmed that Mrs B had ensured that her earnings had remained below the earnings limit by reducing her hours as and when required. The Chief Executive said that although there was no documentary evidence to verify the exact date of Mrs B's visit to the local office, the special payments unit accepted that, on the balance of probabilities, the visit had occurred on a date prior to 10 January 1997. He said that in the special circumstances of the case, BA had decided to award Mr B a special payment reflecting the loss of a statutory entitlement to an adult dependency increase. The Chief Executive said that he had written to Mr B offering him apologies for any inconvenience BA had caused him.
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Later developments
12.10. On 16 March 1999 BA awarded Mr B a payment of £1,881.51 (which they paid to him on 25 March) in respect of the loss of an adult dependency increase for the period from 19 June 1997 to 30 August 1998. The special payments unit authorised an on-going payment of £38.70 per week (subject to uprating) to compensate for loss of adult dependency increase from 31 August 1998. However, Mrs B had received invalid care allowance, paid at the same rate as an adult dependency increase, from 31 August 1998. The special payments unit therefore decided that the authorisation of the on-going payment should be conditional upon Mrs B relinquishing entitlement to invalid care allowance within 57 days of the date on which they notified the Bs of their decision. That notification took place on 25 March. The notification explained that invalid care allowance and an adult dependency increase could not be paid simultaneously, as they were "overlapping" benefits. The notification asked Mr B to consider whether his wife wished to continue to claim invalid care allowance, or whether he wished instead to receive the on-going payment in respect of an adult dependency increase. The notification offered Mr B an appointment at a local BA office should he wish to discuss the advantages and disadvantages of the two options. On 18 April Mrs B told BA that she wished to relinquish her claim to invalid care allowance in favour of the on-going payment in respect of adult dependency increase. BA made the first on-going payment on 3 May.
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Findings
12.11. The Ombudsman's staff have examined BA's papers and I confirm that the facts are as set out in the annex.
12.12. As a result of the 1996 amendment to the regulations, travel costs were no longer deductible from earnings for the purposes of calculating entitlement to an adult dependency increase. By the time BA implemented the amendment in Mr B's case, nearly seven months had elapsed since that amendment had came into effect. When they decided that Mr B was no longer eligible for an adult dependency increase with effect from November 1996, it was too late for Mrs B to adjust her earnings within the 57-day allowance provided in 1995 (paragraph 12.4) and Mr B permanently lost the transitional protection given to him in 1995.
12.13. Mr B said that his wife had visited the local office in January 1997 before an impending increase in her earnings, with the aim of ensuring that her earnings remained below the earnings limit. He said that his wife had not been told about the new rules which had come into effect the previous November. She had also not been told about the effect of the new rules on the way her earnings were calculated. Moreover, Mr B said that the local office had told his wife that her revised earnings would not exceed the limit. BA accepted that Mr B had previously kept them informed of impending changes to his wife's working arrangements. They also accepted that and Mrs B had adjusted her hours of employment so as to meet the conditions of entitlement to an adult dependency increase. Although there was no record in BA's files of her visit in January 1997, BA accepted that, on the balance of probabilities, the visit had taken place and misdirection had occurred. I considered that to have been the correct decision.
12.14. Under BA's arrangements for implementing the 1996 amendment to the regulations, they should have identified cases affected by the amendment when annual reviews fell due or changes in circumstances were reported. In the context of another case that has been referred to the Ombudsman and that is under investigation by him, I am in discussions with BA about whether those implementation arrangements were themselves tainted by maladministration. I have decided not to allow those discussions to hold up my consideration of Mr B's complaint, however, since in his case BA failed even to implement their own rules. The increase in Mrs B's earnings was clearly a change of circumstances, and under their arrangements BA should have identified whether Mr B's case was affected by the 1996 amendment and, if so, should have advised him of that. BA failed to do that. I criticise BA for misleading Mrs B and for failing to tell her about the amendment to the regulations.
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12.15. I was pleased to learn that, during my investigation, BA had agreed to make a payment of £1,881.51 to Mr B to compensate him for loss of statutory entitlement to an adult dependency increase. They had also agreed to make an on-going weekly payment to compensate for continued loss of that benefit, should Mrs B decide to relinquish entitlement to invalid care allowance. I commended BA for their offer to meet Mr and Mrs B should they wish to discuss the options. I note that since then the Bs have chosen to receive the weekly payment in respect of lost adult dependency increase, and that the first payment was made on 3 May.
12.16. During my investigation the Ombudsman's staff asked BA's special payments unit to consider paying interest on the compensation payment made to Mr B. They refused to do that on the grounds that compensation for delay could only be considered when payment is delayed as a result of a clear and unambiguous departmental error. They said that that had not been the case as the decision to accept that misdirection had occurred had been made on the balance of probabilities. They said that there was no evidence that Mrs B had called at the local office in January 1997. They had given Mrs B the benefit of the doubt as to the date of her visit. If she had made it after 22 January 1997 she would, in their view, have lost entitlement to compensation as that would have meant that the 57-day allowance provided in 1995 (paragraph 12.4) would have been exceeded.
12.17. I did not consider that response to be a reasonable one. BA have accepted that they were responsible for giving Mrs B misleading information and have paid compensation on that basis. As the Chief Executive has acknowledged, the local office should have referred the case to the special payments unit in June 1997 for them to consider whether misdirection had occurred and whether misdirection, if accepted, had resulted in a loss of statutory entitlement to an adult dependency increase. The local office failed to do that, and a further 21 months went by before BA considered the question of compensation and agreed to make a special payment to Mr B. It was my view that, as matters stood, Mr B has not been put back into the position he would have been had maladministration not occurred. BA should make good the loss of use of the funds that could have been enjoyed by Mr B. I therefore asked the Chief Executive if he would arrange for the matter be reconsidered. In reply he said that BA had agreed to make an ex gratia payment of £135.72 to Mr B by way of interest on the compensation payment.
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Conclusion
12.18. Mr B received a poor service from BA. I considered the apologies of the Chief Executive, together with the payment of £1,881.51, plus £135.72 by way of interest and the on-going weekly payment to compensate for continued loss of an adult dependency increase, as a suitable outcome to a justified complaint. In view of that I have not examined, in the context of this complaint, the adequacy of BA's general arrangements for implementing the 1996 amendment to the regulations. That is being considered as part of the investigation of a separate complaint that has been made to the Ombudsman concerning which a report will be made in due course.
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ANNEX
Main events in Mr B's case based on the Chief Executive's account
12.a. Mr B was receiving invalidity benefit and claiming an adult dependency increase for his wife prior to 13 April 1995, when invalidity benefit was replaced by incapacity benefit and the qualifying conditions for payment of an adult dependency increase changed. As Mr B had been receiving an adult dependency increase for his wife prior to the introduction of incapacity benefit, his entitlement to that increase was protected, provided payment did not cease for a period of 57 days or more.
12.b. BA conducted periodic checks to confirm whether Mr B's circumstances had changed. Both Mr and Mrs B were aware of the fact that Mrs B's earnings and deductible expenses were an important factor in establishing whether payment of an adult dependency increase could be made. They regularly advised BA of changes in Mrs B's earnings or expenses, either ahead of the change or within a few weeks of the change having occurred. If Mrs B received an increase in her earnings it was her practice to reduce her hours worked to keep below the earnings limit.
12.c. With effect from 25 November 1996 an amendment to the regulations changed the way that earnings were calculated for benefit purposes. Prior to the changes deductions, relating to expenses incurred travelling to and from work, had been made from Mrs B's earnings for the purpose of determining entitlement to an adult dependency increase. This had brought her earnings below the earnings limit which formed part of the eligibility criteria for an adult dependency increase. As a result of the amendment to the regulations effective from November 1996, Mrs B's travel costs were no longer a deductible expense, and that brought Mrs B's earnings above the earnings limit. In May 1997 Mrs B provided BA with pay slips covering the period 20 September 1996 to 4 April 1997 showing that she had worked 16 hours per week and had received a pay rise on 10 January 1997. That prompted BA, who had previously taken no action to enforce the amendment to the regulations in Mr B's case, to examine his claim. Because Mrs B's earnings exceeded the earnings limit as calculated under the amended regulations, BA ceased to pay adult dependency increase to Mr B from 19 June 1997.
12.d. In June 1997 Mr B told BA that his wife had called into BA's local office in January 1997 and had told them of an impending change to her earnings. She had not been told about the change in the regulations which had taken effect in November 1996. Mr B said that BA had told his wife that her earnings were still under the earnings limit for the purposes of eligibility to an adult dependency increase. In a statement Mr B said that he had always been honest and had kept BA informed of any changes in his wife's earnings that could affect their benefit entitlement. He said that his wife had purposely kept her earnings under the limit. The local office calculated that the overpayment of the adult dependency increase for the period from 28 November 1996 to 18 June 1997 totalled £1,068.90. That was not recoverable from Mr B. The local office noted on a form QB 16 (which related to the overpayment calculation): "alleged misdirection accepted see form A6 .... dated 16 July 1997". The form A6 contains BA's notes of an interview with Mr and Mrs B who called at the local office on 16 July 1997. The interviewing officer considered that Mrs B had visited the local office in January 1997 and that her recollections of what she had been told were genuine. Mr B sought reinstatement of an adult dependency increase in an unsuccessful appeal to a Social Security Appeal Tribunal. A Social Security Commissioner refused to grant him leave to appeal against the tribunal's decision.
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