I would spend the money, but acknowledge that it was a mistake when they notice (normally when they add everything up at the end of the month and it doesn't balance).
Say you can't repay it because it has been spent, but that you'd like to. Suggest an interest free loan as a repayment plan because it was their mistake not yours, and you instantly have £1500 in credit.
A similar thing happened to my inlaws, that's the basis of my suggestion.
On what basis could they prosecute? It wasn't his mistake.