Everyone on Universal Credit is being warned of a £77 a month income deficit from October. The household cash deficit will come into effect despite the Government's cost of living support, say campaigners.
The Department or Work and Pensions (DWP) is giving £650 to more than eight million families on means-tested benefits, plus £150 for those on disability benefits and £300 extra to pensioners who get the Winter Fuel Payment. Other financial aid will come from councils and energy providers, reports BirminghamLive reports.
However, campaigners say it will not be enough to keep up with rising prices and have asked the DWP to pause all Universal Credit deductions while inflation is still soaring. Suspending deductions from Universal Credit would help plug the gap caused by the shortfall between the Government's support measures and wider price increases for over a million low-income households, according to research by StepChange Debt Charity.
The charity said its clients on Universal Credit are set to face an average monthly budget deficit of £77 come October even with Government support. The average deduction to repay advance payments and pay back any benefit overpayments is around £50 a month.
StepChange is asking the DWP to pause deductions for these debts until benefits are uprated next April. Suspending deductions doesn’t require legislation and could be implemented quickly, the charity says.
This pause would allow the Government to reform the system of deductions for overpayments, so it is better aligned with the ability of claimants to cope with repayments, it explained. StepChange's new research, based on its clients, shows that 49% of those not in work and experiencing deductions from Universal Credit for previous overpayments have a negative budget - meaning their income is not enough, even after debt advice, to meet their basic essential costs. This is a rate 50% higher than among StepChange clients overall.
Despite the extreme hardship often faced by people not in work and relying on Universal Credit, they can face deductions of 15% for non-priority debts like overpayments. Claimants who are in work can face an even higher 25% deduction, even though they may only be working a few hours.
StepChange research found that nearly two in five clients earning less than the Universal Credit work allowance (for those not in receipt of housing support) of £573 are in a negative budget situation. A 25% deduction for these households is almost certain to leave them struggling to afford day-to-day essentials and may force them to borrow money to get by.
The charity makes three long-term recommendations: ending overpayment deductions for out-of-work claimants and those on low income; reducing the maximum rate to 5%, and linking deduction rate to earnings, incrementally increasing towards 5% as a claimant’s earnings increase.
StepChange Director of External Affairs Richard Lane said: "The principle that debts owed to Government should be repaid when it’s affordable for people to do so is not in question, but now is a time for a pragmatic pause."
A DWP spokesman said: "We carefully balance our duty to the taxpayer to recover overpayments with our support for claimants and safeguards are in place to ensure deductions are manageable."
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