A complacent DWP failed people in state pension fiasco, says MP

Peter Grant MP, who represents Glenrothes for the Scottish National Party, sits on the Public Accounts Committee which investigated the state pension scandal.

In January 2020 Sir Steve Webb and Tanya Jefferies from This is Money alerted the Department for Work and Pensions to several cases where it appeared that people’s state pensions had been underpaid.

The Department looked at each case individually, corrected them, and concluded that they were indeed isolated cases.

There was no evidence of a more widespread problem. 

Despite regular proddings from Sir Steve Webb, himself a former Pensions Minister, the DWP maintained this position for a further seven months.

In August 2020 they finally admitted the scale of the fiasco. Some 134,000 pensioners had been underpaid a total of over £1billion.

Some of the errors went back 35 years. The underpayments ranged in size from pennies to over £128,000.

The DWP has said there are 15,000 pensioners who cannot be traced, or who have died and whose next of kin can’t be traced.

Fixing the problem is likely to cost an additional £23.4million in administrative costs, with 500 extra staff being recruited.

Even the correction exercise has not gone smoothly.

Moving many of their most experienced staff to address this problem has left other parts of the organisation unable to cope with their workload and was a significant contributory factor in 2021 to thousands of people having to wait for months before their first pension payment arrived, plunging many of them into real financial hardship.

And when the National Audit Office audited the DWP’s accounts for 2020/21 they found that nearly one in seven of the corrections had themselves been miscalculated.

This week the Public Accounts Committee published a damning report into what chair Meg Hillier MP described as a ‘shameful shambles’.

Even from a committee that’s no stranger to giving Government departments a hard time, this is a blistering report.

The DWP is accused of relying for decades on IT systems that are not fit for purpose; of ‘a fundamental control failure’ in its key task of paying people the pensions they are due; of failing pensioners through its own complacency; and of a lack of transparency to Parliament about the scale of the underpayments.

After the Committee had taken evidence from the Department it struck me that they had fallen into the classic trap of the circular argument.

They never did any real testing or proper assurance work on the system because historically it had a very low rate of errors.

And it had a very low rate of (identified) errors because nobody ever looked particularly hard for them.

On eight occasions prior to the January 2020 approach from This is Money the Department had identified a small number of errors, but even after the eighth time they decided there was no need to run a thorough check on the whole system.

The inexcusable delay in recognising the warning signs of a major systemic failure will inevitably have meant that even more pensioners died before the Department could give them the money that was theirs by right.

After hearing from the Department, many members of the committee remained concerned that the human cost of this organisational disaster still wasn’t fully appreciated.

In pure accounting terms the error was a tiny percentage of the total pensions bill but for tens of thousands of pensioners the effect would have been devastating.

We were far from reassured when the Department told us it wasn’t really their problem to look at the potential side effects of giving a pensioner a substantial back payment in a single lump sum (for example it could have a significant impact in parts of the UK where a pensioner’s bank balance or in-year income is a factor in calculating what contribution they have to make towards the costs of their care).

That’s perhaps the single biggest change that needs to come out of the whole sorry episode.

In the huge complex machine that is the Department for Work and Pensions (or indeed any other Department) it’s too easy to lose sight of the human beings whose lives can be severely impaired if we get it wrong.

It’s much more difficult to be complacent about ‘low percentage error rates’ if you remember that every one of those errors has a name and a face, and for each of them the error rate is 100 per cent.