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Universal Credit deductions

Volume 719: debated on Monday 5 September 2022

The petition of residents of the constituency of Glasgow East,

Notes that analysis by CPAG shows that in the constituency of Glasgow East there are approximately 5,000 households claiming Universal Credit who are receiving on average £58 less each month than they are entitled to because of automatic deductions; declares that these deductions affect an estimated 4,400 children; further that immediate changes to universal credit deductions must be made in order to allow families to access more of their universal credit award, which will in turn ease the pressures of the cost of living crisis on struggling families; further that having to repay a universal credit advance which sustains claimants through the five week wait for the first universal credit payment, is the most common reason for a deduction; further that every month, families across the east end of Glasgow lose a total of £153,000 from their UC payments to service advance debts to the DWP; further that a further £31,238 is paid by UC claimants to HMRC for historic tax credit overpayments; further that the British Government should reduce the maximum deduction rate for government debts to 5 per cent of the UC standard allowance, in line with other creditors; further that the British Government should also reduce the cumulative level of deductions taken from peoples’ benefits from the current 25 per cent down to 15 per cent, and further that this cost-neutral intervention would provide up to £53 more a month for a couple and up to £33 more a month for a single person or lone parent.

The petitioners therefore request that the House of Commons urge the Government to reduce Universal Credit deductions and allow families to access more of their Universal Credit award.

And the petitioners remain, etc.—[Presented by David Linden, Official Report, 21 June 2022; Vol. 716, c. 817.]

[P002738]

Observations from The Secretary of State for Work and Pensions (Dr Thérèse Coffey):

The Government recognise the importance of supporting claimants to manage their liabilities. Under universal credit, there is a co-ordinated approach to deductions from benefit, which supports claimants to manage their financial obligations.

The primary aim of deductions in universal credit is to protect vulnerable claimants by providing a last resort repayment method for arrears of essential services. The policy also enables social obligations to be enforced when other repayment methods fail, or are not cost-effective, and ensures benefit debt is recovered for the taxpayer in a cost-effective manner.

Regulations provide an overall level of protection that ensures claimants do not see excessive deductions. The overall cap on deductions is set at 25% of standard allowance, this is only ever exceeded to address priority rent and fuel debts. The threshold of 25% provides a balance to ensure priority debts and liabilities are addressed whilst allowing claimants to retain most of their award to meet day-to-day needs.

The Government have reduced the cap twice in recent years. The standard cap was reduced from 40% to 30% of the standard allowance in October 2019, and down again to 25% in April 2021. These two reductions have helped hundreds of thousands of UC claimants to retain more of their award.

Within the standard cap on deductions, there is even more discretion available to support claimants. If claimants find themselves still struggling with the repayment of benefit overpayments, claimants can ask DWP to agree a lower rate of repayment which is affordable for them. Many tens of thousands of claimants have been helped in this way if they contact DWP for support.

Tailored, individual support is the right way to support claimants. Reducing the standard cap in its entirety below 25% of the standard allowance would not be possible without potentially significant negative outcomes.

Firstly, it would reduce the range of debts a claimant could address. It is possible that deductions for vital obligations such as child maintenance or council tax arrears would not be made at all. In November 2021, we supported 29,000 families through making child maintenance payments in this way, many of these would no longer be possible.

Secondly, reducing the standard cap could limit the support claimants can access as an advance. Advances are a claimant’s benefit award paid early in order to support them in times of financial need. A claimant can only request one budgeting advance at a time, meaning that a budgeting advance must be recovered in full before a claimant can request further support for unexpected, emergency costs. Reducing the standard cap, inevitably increasing the recovery period of such advances, would leave some claimants unable to access financial support for unexpected, emergency costs they may face.

Furthermore, there is already a significant amount of support available for claimants who are repaying overpayments. As noted, anyone repaying benefit overpayments who is experiencing financial hardship is actively encouraged to contact the Department’s debt management team. DWP agents will always look to negotiate an affordable and sustainable repayment plan with anyone who contacts us. In many cases, the rate of repayment which can be agreed can even be below 5% of the standard allowance.

There are no plans to reduce the rate for recovering benefit overpayments to 5% of the standard allowance. The Government believe it is important to support claimants out of debt so as to ensure that debt does not act as a disincentive to moving into work. It is right we ensure benefit debt is recovered in a cost-effective manner as it is also our duty to protect public funds. However, we are continually reviewing the deduction policy and will include assessment of this recommendation in our review.

The Government understands the continued pressures that people are facing with the cost of living. These are global challenges to which no country is immune. In considering how best to support claimants, the Government have opted to prioritise non-repayable financial support, deliverable and targeted, to support and help families. This support is worth over £37 billion in 2022-23.

The Government are helping all domestic electricity customers in Great Britain to cope with the impact of higher energy bills, with £400 off their bills from October through the expansion of the Energy Bills Support Scheme (EBSS). This is a doubling of the £200 of support announced in February, and there will no longer be any repayments.

The Government have also considered the specific issues those on means-tested benefits may be experiencing. This includes supporting over 8 million households across the UK in receipt of eligible means-tested benefits with a one-off cost of living payment of £650, paid in two instalments. The Government are going further, giving additional UK-wide support to help disabled people with the extra costs they will face, with 6 million people who receive eligible non-means tested disability benefits receiving a one-off disability cost of living payment of £150.

In total, millions of low-income households will receive at least £1,200 of one-off support in total this year to help with the cost of living. This is in addition to reductions in the taper rate, helping those families who are in work and claiming universal credit to boost their income and ensuring work pays. The extensive measures noted underlines this Government’s commitment to supporting families across the UK, including those in receipt of universal credit.