Summary: Ms Y complained the Council wrongly accused Mr X of fraud and was poor in its communications in reviewing his test and trace support payment causing distress, time and trouble. We have found no fault by the Council.

The complaint

1. Ms Y complains on behalf of Mr X that the Council wrongly accused him of fraud and communicated unprofessionally when reviewing his test and trace support payment. She says this caused him distress and put him to time and trouble.

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The Ombudsman’s role and powers

2. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
3. We cannot question whether a council’s decision is right or wrong simply because the complainant disagrees with it. We must consider whether there was fault in the way the decision was reached. (Local Government Act 1974, section 34(3), as amended)
4. This complaint involves events that occurred during the COVID-19 pandemic. The Government introduced a range of new and frequently updated rules and guidance during this time. We can consider whether the council followed the relevant legislation, guidance and our published “Good Administrative Practice during the response to COVID-19”.
5. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

6. I spoke to Mr X and I reviewed documents provided by him and the Council.
7. I gave Ms Y, Mr X and the Council an opportunity to comment on my draft decision. I considered their comments before making a final decision.

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What I found

Test and trace support payments

8. The Government introduced a £500 payment to support people during self-isolation where they:
• were told to stay at home and self-isolate because they tested positive for COVID-19; or
• were told to stay at home and self-isolate because they were a close contact of someone who has tested positive for COVID-19;
• were employed or self-employed;
• were unable to work from home and would lose income as a result of self-isolating;
• were receiving or were the partner of someone in the same household who was receiving one of seven named benefits.
9. For those not in receipt of benefits, they would still be eligible if:
• they met all the other criteria;
• they were on a low income;
• they would face financial hardship as a result of self-isolating.
10. Councils would decide what counted as low income and financial hardship.
11. The Government issued guidance to councils on administering the scheme; The test and trace support payment scheme, implementation guide for local authorities in England, 30 September 2020.
12. This detailed the application process for councils to use and the evidence they should seek in support of a claim. It included an example application form. Applicants had to provide proof of employment and say whether they could work from home. They did not otherwise have to prove loss of income.
13. Local authorities were responsible for fraud-prevention measures. Discussions were underway (at that time) around best practices to bolster counter-fraud measures and the Government said it would issue further guidance in due course. This would include information on post-payment verification checks.
14. Local authorities could recover costs from people who claimed the payment fraudulently and keep any money recovered to put towards the costs of running the scheme.
15. The Government issued updated guidance on 7 October 2020 to address post payment checks. This said:
• Local authorities were responsible for post-payment checks to prevent fraud. They should conduct a monthly spot check on ten percent of payments made, to identify whether a recipient continued to receive an income from their employer. They would keep the percentage of spot checks required under review, to avoid an unnecessary administrative burden on local authorities.
• If checks led the local authority to suspect that someone had continued to receive full pay from their employer while self-isolating – and therefore should not have received a £500 payment – they would have the right to recoup the money. They should approach this in the normal way that they would approach the recovery of costs from residents.
• Local authorities can recover costs from people who claim the payment fraudulently and can keep any money recovered to put towards their costs of running the scheme.

What happened

16. In January 2021 the Council paid Mr X a discretionary test and trace support payment.
17. From June the Council started auditing payments. Internal emails show it was initially checking all applications in date order. However, the Council considered this may change in future depending on the overall number of applications and Council resources.
18. In August the Council told Mr X it was carrying out a sample audit of payments and it wanted to establish his loss of income. It asked for proof of income before, during and after the period of self-isolation. It gave examples of types of evidence to provide, such as bank statements or payslips, but said this was not an exhaustive list. It would then review his entitlement to the payment. If he did not respond within 10 working days, it may invoice the full amount. It noted that under the Fraud Act 2006 it was an offence to make a false declaration or fail to disclose a change in circumstances and he could be prosecuted if he claimed a payment to which he was not entitled.
19. Ms Y queried the Council’s request.
20. The Council explained it was reviewing all payments currently, but it intended eventually to only review a sample. It apologised if its letter was misleading. Bank statements and Companies House records suggested Mr X was employed and so it needed payslips to confirm his loss of income before, during and after the isolation period.
21. Ms Y explained Mr X was a director, taking dividends rather than a salary. However, she could provide bank statements to show a drop in company income which would result in a drop in dividends.
22. The Council said it made payments to individuals so it needed Mr X’s bank statements or payslips, rather than the company’s.
23. Ms Y provided some information and extracts of bank statements.
24. The Council said the information provided did not tally with previous information and so it needed full bank statements from November 2020 to February 2021.
25. Ms Y provided further statements.
26. The Council explained its view that the information provided did not show a loss of income during the isolation period. Unless Ms Y could provide evidence to show what period the earnings related to and a loss of income as a direct result of self isolation then Mr X did not qualify. It would raise an invoice for repayment. If it found the claim was fraudulent it may consider prosecution.
27. Ms Y further explained that as a director Mr X could pay himself dividends when he wished. He paid himself less in December 2020 as this was a short month in the industry. He paid less again in January 2021 as this was a short month due to isolation. His income was higher after this. The business suffered as he was not on site and therefore his personal income also suffered. She did not know how else to show the shortfall in income.
28. The Council then suggested Ms Y provide payslips. However, she explained these would not assist as these were only for a nominal sum. She asked for an independent review.
29. The Council again asked Ms Y to provide full copies of the bank statements which it would then ask a manager to review; as she had only provided extracts to date.
30. Ms Y complained the policy did not require Mr X to prove loss of income.
31. The Council said it was not practical to ask people to prove loss of income at the point of application as many would not have had this proof until later. The guidance required it to conduct post-payment checks to prevent fraud and error, by confirming there was a loss of income. It was reviewing payments in line with this guidance. It had established Mr X was a company director and not self-employed. Under the Fraud Act it was an offence to make a false representation. Ms Y had not shown Mr X lost income and therefore it would raise an invoice to recover payment. However, she could send a manager further bank statements or payslips to consider if she remained unhappy.
32. Ms Y confirmed Mr X was self employed. She asked for a copy of the guidance on post payment checks. The application did not require them to prove loss of income and she did not understand how else to show a loss of income. For example, he was due to help a friend undertake work but was unable to do so and therefore was not paid. There was no contract for the work, it was not to do with the business and no money was shown on the bank statements, yet he incurred a loss.
33. The Council sent Ms Y the updated guidance and confirmed repayment remained due in the absence of further evidence.
34. Ms Y said the Council could not refuse payment based on updated guidance that did not apply at the time of application. The Council then confirmed the guidance sent to her was issued in October 2020 and applied at the time.
35. Ms Y questioned that the Council was allowed to request repayment and then complained. In summary she said:
• some of the Council’s emails were bullish and intimidating.
• the Council falsely accused Mr X of committing an offence under the Fraud Act 2006. When corrected no apology was received.
• She had provided adequate supporting information that Mr X could not work from home and lost income as a result.
• The Council should put recovery action on hold while it investigated her complaint.
36. The Council said:
• It still awaited full bank statements.
• It apologised if its initial letter suggested it had already decided on fraud; it had since clarified the purpose of its review.
• It did not have details of post payment checks required at the time of setting up the scheme but it did have to carry out these checks.
37. Ms Y further complained:
• The Council did not comment on accusing Mr X of fraud regarding his employment status.
• She had queries around the audit process.
• Full bank statements would not show any more relevant information.
• Its apology was inadequate.
• She still wanted to know how to show lost income when self employed.
• She had since received a letter that the Council would take action if payment was not made in 7 days. She felt this was more bullying and harassment.
38. An internal email shows the Council then placed collection action on hold.
39. In response to Ms Y the Council said:
• It was still verifying Mr X’s employment status.
• It recognised correspondence may appear confrontational but it had to make people aware of consequences. It would review content going forward.
• It initially checked all payments then from October carried out sampling only based on risk analysis and resource implications.
• Information provided to date showed Mr X received regular payments each month November to March and so this did not evidence a loss in income. It suggested providing evidence for a longer period to show there was a loss of income in the month when he had to self-isolate, and full bank statements so it could see all income received in the period. It would contact her separately to explain further.
• It apologised if its initial letter was not clear on its audit process. It would review correspondence to ensure clarity.
• The government did not make clear the checks needed at the outset but it still had to carry these out.
• It would put recovery action on hold.
40. Ms Y said:
• She found the apology inadequate.
• She had further queries on the audit process.
• She could provide statements which showed the regular payments but this would not show income that would have been earned but for the self isolation. She was still not sure how to show this.
• It was unfair for the Council to now seek repayment without warning this at the time of application.
41. The Council wrote to Ms Y to outline the evidence needed. It said the statement extracts provided to date showed Mr X received a steady income in November, December, January and an increase in February, March and April. As payments from November to January were consistent this did not evidence a loss of income during self isolation in January. It suggested she provide further bank statements for a wider period to show the regular pattern of income received prior to isolation. It also requested full bank statements (as opposed to extracts) to ensure that all income was shown. However, she could redact information relating to expenditure, as that was not relevant.
42. Ms Y again said she was not sure how to demonstrate income that was not received in January due to the isolation. The payments referred were the regular payments direct from the company. However, Mr X was unable to undertake the additional one off piece of work outside the company and therefore no income for it was received.
43. The Council said if Ms Y was suggesting Mr X had to cancel a particular project or piece of work, she should provide any further information regarding this. It again explained bank statements showing all his income might help demonstrate that his usual/average monthly income was greater than it was for the month in which he had his period of self-isolation.
44. Ms Y said Mr X arranged the work in person. She could provide a handwritten quote or ask the client to email confirmation. She explained the increase in company payments from April 2021 would have occurred sooner but for the isolation period. The Council asked her to provide what she could.
45. In a final complaint response the Council:
• Apologised again that they found letters threatening;
• Gave further details on its audit process;
• Repeated previous information;
• Referred to the Ombudsman.
46. Ms Y then provided a quote handwritten by Mr X and dated in December 2020. And an email from the third party dated November 2021 confirming Mr X had to cancel work scheduled in January 2020.
47. An internal email shows the Council noted Ms Y had still not provided full bank statements.
48. The Council then wrote to Ms Y that it had decided not to pursue the £500 payment. While she could not substantiate a loss of income, it accepted the nature of Mr X’s work made it probable he lost income whilst self-isolating. It would therefore cancel the invoice.
49. In comments on a draft decision Ms Y said:
• The Council referred to “sampling” applications at a time when it was reviewing all of them and it did not refer to the Government’s 10% requirement.
• The Council said it was fraudulent to claim as self-employed when you are not, insinuating that Mr X was fraudulently claiming to be self-employed.
• When Mr X applied for the £500 payment there was no guidance to inform loss of income would need to be shown.
• The Council may have acted in line with Government guidance but did not refer to this on their website or to anyone applying for grants. If you sign up to any other contract all terms must be made clear and cannot be changed after the contract is made. While this is a grant, you cannot expect people to accept further terms when not expressly stated on application.
• She considers the Council’s accusation of fraud defamatory and questions why the Council was unaware of Mr X’s employment status.
• They understand the Council had a duty to review payments but they are not satisfied with the behaviour and approach of the Council which was neither professional nor fair. The Council disregarded queries as to how to show a loss of income, submitted invoices and threats of action and, made a wrongful accusation of fraud. That is the complaint; not the review of whether the grant was payable.

Findings

50. It is clear Mr X did not have to prove loss of income when he applied for the test and trace support payment. However, the guidance shows the Government expected councils to carry out post payment assurance checks and said they could recover any payments made in error. The Council acted in line with the guidance and so I do not find fault.
51. While it may have been helpful for the Council’s test and trace payment application form to highlight the need for post payment checks, the Government did not require councils to do this and the information was in the published policy accessible to the public. I therefore find no fault.
52. I acknowledge Ms X remains unhappy the Council did not provide further information about post payment checks on the application form. However, the Council provided information as required by the Government. We expect councils to follow Government guidance and it would not be fair or proportionate to hold the Council to a higher standard than this.
53. The Council’s standard letter referred to a sampling process at a time when it was reviewing all applications. I recognise this caused Ms Y some confusion. However, this does not meet our threshold for a finding of fault.
54. The Council explained its view that Ms Y’s evidence did not show a loss of income and suggested what other evidence she could provide. I find no fault in the Council’s decision making or communications.
55. Upon Ms Y providing further information and evidence of lost work, the Council exercised its discretion and confirmed it would not recover the support payment. I find no fault in its decision making or communications.
56. The Council was entitled to warn of recovery action and then take action. While it would have been good practice to place this on hold during the complaints process, (before Ms Y requested this), this does not amount to fault.
57. The Council was entitled to form a view that Mr X may have provided incorrect information and share its view that doing so would be fraudulent. While I appreciate Mr X and Ms Y dispute this and found the Council’s accusation upsetting, this does not amount to fault. I cannot make findings on defamation as this would be a matter for the civil courts to decide.
58. Having reviewed the correspondence exchanged I find the Council communicated with Ms Y in a timely manner. While there was considerable back and forth this was not due to any fault by the Council.
59. I note some of the Council’s apologies to Ms Y were conditional rather than clearly in acceptance of any blame. While this does not amount to fault in this case, the Council should bear this in mind in future.
60. I appreciate Ms Y is unhappy with the Council’s actions however I have carefully reviewed all the communication between the parties and considered whether there was any maladministration or service failure by the Council. I have not found any fault and so my decision remains the same.

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Final decision

61. I have completed my investigation. I find no evidence of fault in the Council’s review of Mr X’s test and trace payment or in its communications with him or Ms Y.

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Investigator's decision on behalf of the Ombudsman