Deductions are taken by the Department for Work and Pensions (DWP) from people’s benefits to pay off debts incurred through advance payments of benefits or previous errors or overpayments by the government.
But MPs on the committee warned that repaying advances granted to claimants, who have to wait weeks before a first payment when switching to universal credit, “left many people struggling”.
“Repayments to the DWP are not subject to the same affordability assessments expected in consumer credit markets, and many families simply cannot afford these deductions from social security payments, which are already behind inflation,” they said.
“We recommend that, as during the pandemic, repayments should be paused and only restored as the rate of inflation reduces, or when benefits have been uprated to reflect the current rate of inflation”.
MPs on the committee also urged the government to review and increase the benefit cap — frozen since 2016 — “to ensure it is in line with average household incomes” and increasing rent, energy and food costs.
Chair of the committee and Labour MP Stephen Timms said: “Inflation is at a 40 year high, with spiralling energy, food and fuel prices adding to a cost-of-living crisis not seen for a generation and a bleak outlook for many families.
“Deductions by DWP from benefits are contributing to the hardship and the government should give those struggling some much needed breathing space by following its own advice to other creditors and pausing repayments until the threat of inflation recedes.”
He added: “A properly functioning social security safety net should be agile enough to respond to worsening economic conditions, but the high levels of inflation have laid bare the dysfunctional nature of parts of the system — not least that any increase in benefits is already seven months out of date when it takes effect.”
A DWP spokesman said: “We’ve reduced the amount that can be taken through benefit deductions twice in recent years to no more than 25 per cent. We’ve also doubled the time period over which they can be repaid and claimants can contact DWP to discuss deductions if they are experiencing financial hardship.
“We recognise people are worried about the impact of rising prices, that’s why we’re providing £37 billion of additional cost of living support. This includes £1,200 in direct payments for eight million low-income households, most of whom received an initial £326 earlier this month.
“As part of our support package, we’ve also frozen energy deductions on universal credit, meaning any new request from energy suppliers for bills to be paid directly from benefits, or for an existing payment to rise, is denied unless the claimant also requests it.”