Thousands of universal credit claims see 40% of benefit deducted for debts

Thousands of Universal Credit claimants are having 40% of their benefit deducted to pay back outstanding debts.

Labour MP Ruth George said the high level of deductions from payments “will see more people with no option but to go into debt”.

The Department for Work and Pensions said there were safeguards to protect benefit claimants from big reductions.

But figures obtained by Ms George show just how many Universal Credit claimants are having major chunks of their benefit deducted every month.

In January, 6% of all Universal Credit full service claims had 40% deducted from their standard allowance, according to figures released in response to a written parliamentary question.

DWP also says a small percentage of less than 0.5% of claims had total deductions of more than 40%.

In these cases, deductions for rent or fuel costs are applied first, in order to protect claimant welfare.

But the whole deductions system has prompted concerns among MPs and charities over the impact on claimants.

Ms George, a member of the Work and Pensions select committee, said she was very worried about the low level of income people are left with.

“Support under Universal Credit is already below poverty levels for many groups, especially lone parents and disabled people,” she said.

“It’s very difficult to get by on the full level of support, but high levels of deductions will see more people with no option but to go into debt.

“It is almost impossible to repay a loan when your income is so low, and the high cost of credit for people on low incomes creates a vicious circle of debt.”

DWP can directly collect debts from Universal Credit payments, including for previous benefit and tax credits overpayments and certain third party debts such as council tax and rent arrears.

Additional deductions can also be made to repay advance payments for Universal Credit.

Claimants face higher levels of deductions under Universal Credit compared to the old legacy benefits system.

Under tax credits, the maximum deduction is 25% of the award for those whose total income is less than £20,000 a year.

Some 20% of Universal Credit payments are now often deducted to pay for rent arrears, compared to a standard rate of 5% on legacy benefits.

In a major report on Universal Credit last year, charity Citizens Advice said more than half of its advisers it spoke to had helped claimants who were having problems with deductions.

Advisers cited concerns over higher rates, including cases not involving benefit fraud, as well as fears that higher deductions for rent arrears were causing claimants to access foodbanks or other welfare funds.

The issue of fraud and benefit overpayments is also contentious, given many errors are caused by officials rather than claimants.

DWP fraud and error statistics show that in 2015/16 and 2016/17 around a third of all Universal Credit overpayments were caused by official error, be it by the DWP, a local authority or HMRC.

Some £90 million was overpaid out of £1.6 billion given out through Universal Credit in 2016/17, according to the same figures.

DWP says it has a duty to recoup all overpaid benefits, regardless of who was at fault.

In the most recent month for which figures are available, 40,521 claimants had a deduction from their Universal Credit in relation to a benefit overpayment, which related to their legacy benefits.

The mean value of the outstanding balances was £1,082.50 and the median figure £332.55.

A previous Freedom of Information request revealed that between April 2016 and October 2017, 95,620 Universal Credit claimants had deductions made from their payments due to debt on tax credits.

Campaigners have sounded the alarm over the debt issue for Universal Credit claimants for a variety of reasons.

The long waiting period for claimants to get their first payment has been linked to higher rent arrears and people turning to payday lenders.

The Government cut the waiting time from six weeks to five at last year’s Budget, as well as allowing households to get an advance of a full month’s payment within five days of applying.

But Ms George said this would increase the number of people whose ongoing Universal Credit payments are reduced.

Other concerns have been raised about poor administration in the system and difficulties some families have adjusting to Universal Credit, such as budgeting for monthly payments and rents not being paid directly to landlords.

A DWP spokeswoman said: “We have a duty to the taxpayer to recover any overpayments and we recovered £1.1 billion last year.

“People are told about this in advance and they are recovered by regular deductions.

“There are safeguards in place to protect claimants from large deductions being taken at one time and budgeting support is available to help people manage their money.”

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