Half of those on universal credit are losing money on every payment because of automatic deductions by the Department for Work and Pensions (DWP), according to research.
Claimants are losing £1 in every £13 of basic payment to repay debts to private landlords and utility companies and correct mistakes made by the tax office, said the New Economics Foundation (NEF), a left-leaning thinktank. Each household with money deducted lost an average of £63 a month. This amounted to a total loss of £1.3bn from benefits support in 2022-23, NEF found through a series of parliamentary questions.
Some claimants have had money deducted for as long as they have been on benefits. Annie, whose name has been changed to protect her identity, is a single parent of two children in north-east England. She receives disability benefits because of mental health diagnoses that leave her unable to work. Annie takes part in Changing Realities, a project supported by the universities of York and Salford and involving more than 100 parents and carers across the UK to document life on a low income and push for change.
Annie has £66 a month deducted from her benefits payment of £660 a month, in part to pay back a budgeting loan she received from the DWP to cope with extra costs at the beginning of the school year and the Christmas holidays.
“That’s the only loan that any of us [on benefits] have access to, and for me, it helps a lot with pre-Christmas and getting back to school in September – having a bit of money to cover the costs that can’t fit into my daily budget,” Annie said.
However, the automatic deductions mean that every month Annie is struggling to meet costs. “That’s an extra £66 that could go towards the food budget, or the children could join clubs. Right now, fruit is a luxury, meat is a luxury. I am skipping meals left, right and centre because the kids need to eat. I have holes in my shoes because my kids need new school shoes.”
The amount deducted was found to vary across the country, with two-thirds of households in Blackpool South receiving universal credit having money deducted from payments – almost double the proportion in the least affected constituency, South West Devon.
NEF said benefits deductions trapped households in a cycle of debt, with a failure to provide proper support followed by an aggressive pursuit of the debts that built up, affecting people’s mental and physical health.
Sam Tims, a senior economist at NEF, said: “Cuts to already meagre levels of universal credit have made it harder for people to afford the basics like food on the table and a warm home. The mental and physical strain this creates makes it more likely that they will be forced to take time off work. If we want an economy that allows everyone to thrive, the next government must guarantee that social security covers people’s essentials and ensure this guarantee isn’t undermined by the pursuit of debt.”
The DWP said deductions were capped at 25% and used as a last resort to help claimants clear debt.
