Half of Universal Credit claimants have their payments cut each month due to automatic deductions by the Department for Work and Pensions (DWP).
According to research by the New Economics Foundation (NEF), 50% of Universal Credit claimants are losing £1 in every £13 of their basic payments to repay debts. This includes debts to landlords, utility companies and mistakes made by Government departments. On average, benefit claiming households lost an average of £63 a month in 2022-23, in total this equated to around £1.3billion overall.
The data revealed that around 730,000 households lost money to pay back an advance loan from the DWP. This loan was paid to claimants to cover the five week wait for their first payment. Alongside this, 910,000 households lost money to pay back a budgetary advance from the DWP to meet emergency costs. Finally, 640,000 households lost money to pay back Tax Credits which had been overpaid by HMRC. The NEF says this is a debt people are often unaware of until they migrate from Tax Credits onto the Universal Credit system.
Some claimants have had money deducted for as long as they have been on benefits. Annie, a single parent of two in north-east England, is one such claimant. Speaking to The Guardian, she explained that she receives disability benefits due to mental health issues that leave her unable to work.
Annie is part of Changing Realities, a project documenting the lives of low-income parents and carers in the UK. Currently, the mum of two has £66 deducted from her monthly benefit payments to repay a budgeting loan from the DWP. Annie claimed this loan to help with costs at the beginning of the school year and during the Christmas holidays.
However, these deductions have left Annie struggling to meet basic needs. Annie said she often skips meals to make sure her children are fed. She said: "That’s the only loan that any of us [on benefits] have access to. 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.”
This loss of income was found to vary across the country with the worst affected constituency being Blackpool South where two-thirds of Universal Credit households have around 11.2% deducted from their payments. The least affected constituency was South West Devon, where the level of support was 5.6% lower.
The NEF argues that benefits deductions trap households in a cycle of debt, exacerbating financial struggles and negatively impacting 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."
The DWP told the Mirror that deductions were capped at 25% and used as a last resort to help claimants clear debt. However, the NEF insists that the current approach is counterproductive. Tims added: "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."