A sting in the tail of benefits reform: Universal Credit and the CRU

The significance of the implications of this for both claimants and compensators alike are becoming apparent.

Executive summary

Due to what seems to be a quirk of drafting or simply an oversight by legislators, Universal Credit (‘UC’) is a recoverable benefit for the purposes of compensation payments in its entirety, and is only capable of being offset against a claim for loss of earnings. Previously, only Income Support, Employment and Support Allowance (‘ESA’) and Jobseeker’s Allowance (‘JSA’) were recoverable, but three other benefits integrated into the new UC payment - Housing Benefit, Working Tax Credit and Child Tax Credit - now also become recoverable because UC is a single payment which cannot be broken down into constituent parts for the purposes of recovery by the Compensation Recovery Unit (‘CRU’). With UC now starting to filter through to Certificates of Recoverable Benefits (‘CRB’), the significance of the implications of this for both claimants and compensators alike are becoming apparent.

In detail

When the Welfare Reform Act 2012 (‘the Act’) was passed, coming in to force on 29 April 2013, it was generally, if cautiously, welcomed by compensators on the basis of its stated aim of encouraging those on benefits back in to work and to ensure that ‘work paid’.

The role of the CRU will be familiar to all those who work in claims. The CRU, part of the Department of Work and Pensions, has to be notified by compensators when a claim for damages arising from accident or injury is submitted. Benefits paid as a result are recorded and if compensation is subsequently awarded or paid, compensators are liable to repay those benefits paid as a result of the accident or injury. In ‘like for like’ cases, compensation payments are offset against benefits received to ensure that claimants are not over-compensated.

The Act legislated for the introduction of UC which replaced and combined the six benefits listed above. At the same time, the Social Security (Recovery of Benefits) Act 1997 (which governs all key legal issues relating to benefits recovery and the CRU) was amended so that UC became a benefit which was recoverable from and payable by compensators. The roll out of UC began in 2013 but it has been dogged by difficulties, albeit by October 2018, it was estimated that more than one million households were receiving UC. With the passage of time, UC is now starting to appear on CRBs as a single payment which is repayable by compensators making payments to claimants.

Where, under the old scheme, the six benefits detailed above were listed separately – so it was immediately apparent which fell to be repaid as having been paid as a result of the accident or injury – under the new rules, UC is listed simply as one payment, even though made up of a number of component parts. The crucial issue is, however, that for the purposes of CRBs and repayment by compensators, the UC payment cannot be broken down into its constituent parts and therefore the UC amount which is listed falls to be repaid in its entirety.

UC is also conceptually different in that it is a ‘household’ payment which may well include payments to an injured claimant’s spouse in respect of, for example, Housing Benefit or Child Tax Credit which may well not have been payments made as a result of an accident or injury.

To add yet more ingredients to an already complex mix, UC is calculated monthly and can fluctuate due a number of different circumstances which means that we are also likely to see ‘estimated’ CRBs where benefits are likely to be paid in the future up to the end date of a CRB.

What does the CRU say?

We have discussed this issue at length with a number of representatives from the CRU. They are adamant it is not possible to break down a UC figure and that, as a result of UC being a recoverable benefit; it is repayable in its entirety. 

Conclusions and implications

The comparatively small number of injured people receiving UC has meant that this issue has only recently started to manifest itself and it is unknown at this stage whether any successful appeal has been made or whether this apparent oversight or anachronism in the rules has been brought to the attention of Government.

Pending new guidance or advice from the CRU or confirmation that UC can be broken down into its constituent parts, claimants and compensators alike will be seeing what appear to be CRBs detailing hugely inflated sums. There are, however, a number of issues to which compensators need to be alive:

  • Care always needs to be taken in expressing whether offers are gross or net of CRU repayment. This is now even more significant.
  • Estimated certificates may mean the total amount of recoverable benefits is not known when an offer is made. Again care should be taken to ensure both parties agree what is to be done in the event the offer is accepted but there is change in the sum due to the CRU i.e. who pays any increase or receives the benefit of any reduction. Offers should be clear on this point to avoid any dispute later on.
  • Claimants may be less likely to accept gross offers due to larger amounts of benefits being repayable. Compensators need to be aware that offers made net are likely to mean higher than usual repayments to the CRU.
  • The situation with regard to an appeal to the CRU on this specific issue is unknown but if the CRU cannot apportion any UC payment between accident and non accident related benefits, prospects for a successful appeal must surely be reduced where information as to exactly what benefit was paid and why is either very scarce or simply unavailable.
  • There may be satellite litigation around whether a claimant should face costs risk for not accepting an offer which was reduced substantially to reflect recoverable benefits if there is a subsequent rule change which makes that offer more palatable.

We anticipate that this issue will continue to gain traction as its implications are felt more widely. In the meantime, compensators do need to be aware of it and to be prepared for higher than usual repayments to be made to the CRU.

For further information about Weightmans LLP or to discuss any of the issues in this update, please contact Norman Challis, 0113 213 4098, norman.challis@weightmans.com.

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