Universal Credit payments are being reduced by £63 a month on average as part of the Department for Work and Pension’s (DWP) “relentless pursuit” of debt repayments, according to a leading think tank.
The New Economics Foundation (NED) is highlighting the scale of automatic debt repayments which is resulting in the basic payment for all families on Universal Credit being slashed by eight per cent.
As a result, every £1 in £13 paid through the benefit payment’s basic rate is taken as part of debt reductions.
Analysis on information taken from parliamentary questions found that half of Britons currently on Universal Credit have cash automatically deducted from their payments to repay debts.
On average, £63 a month is deducted from each household impacted by deductions made by the DWP.
This is the equivalent to Universal Credit claimants losing a total of £1.3billion in benefits support during the 2022/23 tax year.
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Universal Credit claimants are seeing their payments reduced
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According to parliamentary question 191730, 730,000 households lost money from benefits to pay back an advance from the DWP to cover the five-week initial wait to get the first Universal Credit payment in February 2023.
Over the period, 910,000 households saw their Universal Credit claim cut to pay back a budgetary advance from the DWP to meet emergency costs.
Some 14 per cent of claimants, the equivalent of 640,000 of households, lost cash to pay back tax credits overpaid by HM Revenue and Customs (HMRC).
Britons on low income could be eligible to access support through local authorities, notably via the Household Support Fund and discretionary housing payments.
For 2022/23, this support was £943million across England, with around 78 per cent of financial assistance being awarded to working-age households.
However, local authority support is being “dwarfed” by the £1.3billion being deducted out of Universal Credit for debt repayments by the DWP, the NEF is warning.
The organisation is sounding the alarm that the Household Support Fund is expected to run out of funding by September.
If an extension is not granted, benefit money lost to debt deduction is forecast to be 13 times higher than local authority support available to low-income households of working-age.
In response to this pending crisis, the NEF is urging that the next Government to make the Household Support Fund permanent and lowers the maximum amount which the DWP can deduct from each universal credit payment from 25 per cent to 15 per cent.
Furthermore, the think tank is recommending that an “essentials guarantee” is introduced which uses the social security system to establish an income floor below which no family can fall.
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Sam Tims, senior economist at the New Economics Foundation, said: “The social security system should provide a safety net for us all. But low-income families are trapped in a vicious cycle of debt due to insufficient wages and state support and the relentless pursuit if debts that built up as a result.
“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.”
A DWP spokesperson told GB News that deductions remain capped at 25 per cent and are used as a “last resort” to ensure claimants get out of debt.