Larusai, R (on the application of) v Secretary of State for Works and Pensions

The statutory calculation of an overpayment precedes the Secretary of State’s discretion to waive or reduce recovery. A claimant’s unclaimed or notional entitlement to a different benefit does not constitute a debt, defence or legally enforceable credit against the recoverable overpayment. A policy distinguishing tax credits from benefits is rational where it reflects the statutory scheme and seeks to encourage disclosure and movement into employment. Hardship must be considered, but receipt of benefit and ordinary repayment difficulty do not alone justify waiver. A decision may remain subject to review as circumstances change.

The claimant, a recipient of income support, failed to disclose employment and was found to have been overpaid £3,234.96. She argued that the Secretary of State should reduce recovery by approximately £2,000, representing her estimated notional entitlement to working families tax credit had she claimed it.

The Secretary of State declined to make that allowance under his policy. The claimant sought judicial review, alleging misinterpretation of policy, penalisation, an impermissible windfall for the State, and inadequate consideration of hardship to herself and her child.

1. The application for judicial review was dismissed. Under section 71(1) of the Social Security Administration Act 1992, the amount recoverable because of misrepresentation or non-disclosure is determined first. The Secretary of State must then decide how much of that recoverable sum it is just and fair to pursue.
2. The regulations prescribe particular deductions. Regulation 13 of the Social Security (Payment on account, Overpayments and Recovery) Regulations 1988 permits specified offsets between benefits, but excludes a notional entitlement to working families tax credit and confines tax-credit offsetting to tax credits. The claimant therefore had no statutory right to the proposed credit.
3. The policy distinguishing working families tax credit from benefits was rational. It reflected the distinction recognised by regulation 13, the separate administration of tax credits, and the policy objective of encouraging disclosure and a move from benefit to employment. The Department was entitled to develop more specific guidance from the general Government Accounting 2000 document.
4. Recovery was not penal merely because other sanctions, including prosecution, might have been available. Nor was it an unlawful windfall. A notional tax-credit entitlement was not a debt owed by the department and could not provide a defence or relief at common law.
5. Hardship had been considered by reference to the claimant’s detailed financial circumstances. Receipt of benefit and the ordinary hardship caused by repayment did not automatically justify waiver. The length of repayment could be relevant, but the decision was reviewable, deductions were subject to statutory limits including regulation 16(4)(b), and the claimant’s circumstances could change. Annual review and further applications for waiver remained available.

First-instance judicial review proceedings. No prior appellate decision is stated in the judgment.