Until 1997, the Department of Social Security kept secret the rules which it used to pay compensation if officials made an error. It was forced to publish them following a long campaign by Money-go-Round which eventually went to the Ombudsman. Now, it has re-issued the rules to local offices and the scheme has been streamlined and improved. However, it is still very complex and the conditions to get any payment at all are tough. The first step is proving that a mistake - or 'official error' as the Department calls it - has occurred. Unless there has been a mistake, no compensation will be paid.

The Department pays out most money to compensate people when they have been badly advised and have lost the right to benefit as a result. For example, if a married women is told she must wait to claim a retirement pension until her husband retires, but in fact she had a pension entitlement on her own contributions, that could stop her claiming at 60. As benefit cannot be backdated more than three months, she could lose years of pension. The Department calls this 'loss of statutory entitlement' and will make a ex gratia payment equal to the amount lost. Cost in 1997/98 - nearly £2 million.

If the pension or benefit someone is owed is delayed, then compensation can also be paid for the delay. But the rules for getting it are very tough and the amounts paid are modest. First, the delay has to be very long. The Benefits Agency has its own targets for how quickly a benefit should be paid. For example, all retirement pension claims should be dealt with in 60 working days - 12 weeks. But no compensation for delay will be paid until three times this period has elapsed. So a woman of 60 who reaches pension age and does not claim her pension due to an official error will have to suffer a delay of eight months before compensation will be considered - and then it will only be for the period after the delay occurs. The limits for compensation vary from benefit to benefit - it can be paid after two months delay to someone who is disabled and has less than six months to live. The longest delay before compensation is considered applies to war pensioners - they have to wait for their benefit for more than one year eight months before any compensation can be considered. The Department will not pay compensation for any period while a case is going through the courts.

The amount of compensation paid for delay is related to the average rate of building society interest. The Department only pays simple interest unless the delay exceeds ten years when compound interest is used. No compensation is paid on amounts owed of less than £100. And no compensation of less than £10 will be paid. Despite this catalogue of get-out clauses, the Department had to pay out more than £1.3 million for delay in 1997/98.

People can also claim back any money they have spent on pursuing their claim after a mistake has been made. That can include everything from the cost of phone calls or letters to the fees paid to advisers. However, the Department is strict about the circumstances under which professional help will be funded. Cost in 1997/98 - just over half a million pounds.

Finally, the Department will make what it calls 'consolatory payments' in "very exceptional circumstances" where a mistake has had a "direct adverse effect" on the customer's life. This must go beyond the normal inconvenience or stress of dealing with complex legal matters and it must go beyond the natural feelings of annoyance, anger, or upset that mistakes cause. It must be persistent error causing "gross inconvenience", "gross embarrassment, humiliation, or unnecessary personal intrusion" or severe distress. The Department gives examples of wrongful arrest, incorrect identification of parents, or taking away someone's benefit book in a public place. The Department managed to keep these payments down to just £27,000 in 1997/98.

Anyone who wants to pursue a claim should get the publication Financial Redress for Maladministration (revised September 1998). Copies are available at Benefits Agency offices or to buy from The Stationery Office price £6.50.

27 February 1999

e-mail Paul Lewis on paul@paullewis.co.uk