DWP cuts Universal Credit by £63 a month for half of claimants - to cover debts

Half of Universal Credit claimants are having their payments automatically deducted to cover debts
-Credit: (Image: Peter Dazeley/Getty Images)

Shocking new figures have revealed that the Department for Work and Pensions (DWP) is making automatic deductions to Universal Credit payments for half of claimants - to repay debts owed to landlords, utility companies, and errors made by Government departments.

The data from the New Economics Foundation (NEF) has revealed that 50 per cent of Universal Credit claimants lose £1 in every £13 of their basic payments to repay such debts. In fact, in the year 2022-23, the typical household claiming benefits lost around £63 a month - totalling approximately £1.3 billion overall.

The research found that approximately 730,000 households had money deducted to repay an advance loan from the DWP. This loan was given to claimants to cover the five-week wait for their first payment.

Furthermore, 910,000 households had money deducted to repay a budgetary advance from the DWP to meet emergency costs. And lastly, 640,000 households had money deducted to repay Tax Credits which had been overpaid by HMRC, reports the Mirror.

The NEF states that this is a debt people often don't know about until they switch from Tax Credits to the Universal Credit system.

In fact, some claimants have been hit with deductions for as long as they have been on benefits - such as Annie, a single parent of two in north-east England, whose name has been changed to protect her identity.

She told The Guardian that she receives disability benefits due to mental health issues that prevent her from working.

One single mum is having as much as 10 per cent of her benefits payments deducted to pay back a budgeting loan from the DWP
One single mum is having as much as 10 per cent of her benefits payments deducted to pay back a budgeting loan from the DWP -Credit:John Lamb/Getty Images

Annie is involved in Changing Realities, an online programme sharing the experiences of low-income parents and carers in the UK. She is currently having £66 a month trimmed off her £660 benefit payments - a sizeable 10 per cent - as she repays a budgeting loan from the DWP, which she took out to help her manage expenses during the start of the school year and the Christmas season.

Unfortunately, these cuts have resulted in Annie barely meeting basic needs - and it's not uncommon for her to forego meals to ensure her children eat properly.

Shedding more light on her predicament, 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."

The scope of income reduction was found to vary nationwide, with Blackpool South being the most impacted region, as around two-thirds of Universal Credit households are subjected to approximately 11.2 per cent deductions from their payments. On the other hand, South West Devon appeared as the least affected constituency, displaying a level of support 5.6% lower.

The New Economics Foundation (NEF) believes that deductions in benefits trap households in a debt cycle, further aggravating financial hardships, and negatively affecting both mental and physical health.

NEF's senior economist, Sam Tims, told The Guardian: "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."

In response, the Department of Work and Pensions (DWP) has stated that these deductions are used as a last resort in order to help claimants settle their debts, with the cap set at 25 per cent. Despite this explanation, the NEF remains convinced that the current strategy is not beneficial.

Tims continued: "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 has been approached for comment.