Universal credit deductions of up to 25% pushing people into poverty, says report
Ministers are pushing people into poverty and debt through a policy that allows universal credit payments to be cut by up to 25%, a report by the Lloyds Bank Foundation has found.
With the cost of living crisis already putting a severe strain on households, the report titled Drivers of Poverty, said a system that allows deductions from benefits was leaving some people without enough money to live on, “driving impoverishment and further debt, particularly hitting the most vulnerable”.
It said at a time of rising costs “the government has a choice – and a responsibility – to fix the system.”
Almost half (44%) of those receiving universal credit have money automatically deducted, with an average of £78 a month withheld from their payments. For a single person aged over 25 that represents a fifth of their entitlement.
A single mother quoted in the report said she was supporting three children on £118 a week and did not know why deductions were being made. “They are taking £100 a month, leaving me needing the food bank and struggling with utilities,” she said.
Deductions can be made for a range of reasons, including to cover advance payments made to new claimants or to claw back overpayments.
The most frequent is recovery of advances. These are given to cover expenses during the five weeks claimants must wait before universal credit begins. The advance is interest-free but must be repaid from subsequent benefits payments.
Another key reason is overpayments of tax credits, but debts for energy and rent can also be clawed back through the system.
The report found that historical debts around tax credit overpayments often surprised claimants who had been unaware of them. It described this as “a relic of a clunky legacy system that
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