Universal Credit Deductions

Chris Stephens Excerpts

Wednesday 19th July 2023 Westminster Hall

[Dame Maria Miller (in the Chair)]

It is a little warm in here today, so if Members want to remove their jackets, that is perfectly allowable.

[Chris Stephens (Glasgow South West) (SNP)]

I beg to move,

That this House has considered the matter of Universal Credit deductions.

It is a pleasure to see you in the Chair, Dame Maria. This is a matter of considerable interest and concern to me, as it will be to many other Members, each of whom will have busy caseloads from worried or despairing constituents, many of them describing how the universal credit system has worked for them or, more to the point, has abjectly failed to work for them.

In March last year and earlier this month, I questioned the Secretary of State on how many universal credit claims were having deductions taken from them in the most recent month for which data was available in each parliamentary constituency, what was the average size of sums deducted in each constituency, what was the total sum deducted from claims in each constituency, and what proportion of each sum was deducted to repay advance payments. The figures in the Scottish context were quite revealing to me. For example, I learned that in one month alone in 2021, 180,000 households in Scotland had an average of £60 deducted from their social security payments, and that between December 2022 and February 2023, the UK Government deducted £12.1 million a month from 206,000 Scottish households. The number of households affected by deductions and the sums being recouped seem to be increasing.

Those figures were disturbing but maybe not surprising. After all, last year the Work and Pensions Committee, of which I was then a member, published a report on the cost of living, which called on the Department for Work and Pensions to pause the deductions and restore them gradually only as the rate of inflation reduced, or when benefits had been increased to accurately reflect the rise in prices. The Government rejected the report’s recommendations, stating that pausing deductions is not

“necessarily in the claimant’s best interest.”

But claimants know that since then, inflation has remained very high, and the rise in the price of basic foodstuffs for the poorer has been ferocious. It is time to take a broader look at the problems with universal credit deductions. That is why I secured this debate.

[Margaret Ferrier (Rutherglen and Hamilton West) (Ind)]

I cannot tell my hon. Friend how many times a constituent has contacted me to tell me that, as a result of the universal credit calculation and payment cycle and the fact that their employment paydays are not exactly a month apart, they are trapped in an endless cycle of recalculation and financial hardship. Does he agree that it is clear the current assessment cycle is not fit for purpose?

[Chris Stephens]

I do agree, and I point my hon. Friend to the written answer I secured, which gives the statistics for every constituency in England, Wales and Scotland. She will see that the rate of deductions is around £60 in her constituency, but she will also notice that the number of households affected by deductions is increasing. She makes an important point about looking at an individual’s pay cycle and whether it is four-weekly or monthly.

Let us look at some examples of people affected by deductions. The Trussell Trust tells us that almost half of people referred to food banks in its network are subject to deductions from their benefit payments due to repayment of a benefit advance or a benefit overpayment. We will see that linkage repeatedly during the debate. The Trussell Trust goes on to remind us that

“The five-week wait for Universal Credit means many people have no choice but to take an Advance Payment to manage essential bills like rent and utilities”,

which immediately places them in debt and reduces their income below the standard allowance.

Deductions for overpayments, including tax credit overpayments, often take people by surprise because they are historical or are the result of DWP error. Like other deductions, they can be taken from people automatically at unaffordable rates. The standard allowance of universal credit does not provide enough income to cover the cost of life’s essentials, so any deduction taking people below that already low level will push them further into hardship. Key phrases are advance payments, overpayments that are historical or due to Department for Work and Pensions error, and the cost of living essentials. I will come back to each of those.

We then hear from the Trussell Trust about consequent mental health wellbeing, which is often impaired by people struggling to understand what they owe, and why, and how to access support. The Trussell Trust is not alone in making those observations. The organisation Feeding Britain has

“a vision of a UK where no one goes hungry”.

I should also mention Good Food Scotland, with which I do a lot of work in Glasgow South West.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing this matter forward, and I will be making my own contribution to the debate. The Trussell Trust in Newtownards in my constituency was the first in Northern Ireland, and what it has to say about vision reinforces what the hon. Gentleman has said. According to Newtownards Trussell Trust,

“our vision is for a world where food banks, like ours, don’t need to exist.”

That is what we want to see, and I know the hon. Gentleman wants the same.

[Chris Stephens]

I thank the hon. Gentleman very much for that intervention. As he knows, he has relatives of mine among his constituents in Newtownards. He is absolutely correct about our vision: we all want to see a world in which food banks do not exist. I know he is very supportive of my Food Poverty Strategy Bill, which is a private Member’s Bill that I recommend to all hon. Members.

Feeding Britain has talked to many people who are having to go hungry. In the days leading up to the debate, food banks in Brighton, Derbyshire, Leeds and High Wycombe reported speaking to individuals who all cited deductions as a key reason for referrals to them, and described some harrowing cases. For example, a client in Chichester has some £55 a week to live on after deduction of rent and other deductions for advances and loans from universal credit. The client received no prior warning or notice of the deduction, and even her work coach was unable to explain why the deduction had been made. That client is a lone parent with three children. She is worried that even if the deduction is found to be a mistake, she will be waiting until the next payment to receive the money that was deducted.

Feeding Britain has also told us of a client in Manchester who had £72 deducted for rent arrears. The first he was made aware of that was three days before payment when he accessed his payment statement. Living off the standard universal credit allowance is difficult as it is, but so much being deducted with so little notice makes it almost impossible. The gov.uk website states that universal credit will place a note on the journal when a third-party debt deduction is about to start, but no such information about the debts—how much was owed or how long the client would be paying off the debt—was provided in that example; there was not even a note telling them how further information could be obtained by telephone. The closing comment from the Manchester office was that

“the most efficient aspect of Universal Credit is debt retrieval”.

In the report “UK Poverty 2023: The essential guide to understanding poverty in the UK”, the Joseph Rowntree Foundation highlights that key design features of the social security system, including having to wait five weeks for the first universal credit payment and universal credit being deducted to pay off debts and arrears, directly lead to higher food insecurity and have contributed to the rise in food banks.

The Child Poverty Action Group has shown that across the UK the number of children living in households with debt deductions being taken from their universal credit has risen to more than 2.2 million, making up more than half—53%—of all children in households receiving universal credit. Those families are missing out on an average of £73 a month as a result. Every commentator seems to express similar views on where the system is failing, and there is much commonality on where they think the appropriate solutions lie.

[Margaret Ferrier]

The use of a predominantly online system has led to many cases being raised with my office. In particular, vulnerable constituents without consistent internet access or phone credit may be unaware that they have been sanctioned until the payment is made because they are not able to access their journal. Have the hon. Member’s constituents experienced that? Does he agree that DWP’s communication needs to be improved?

[Chris Stephens]

Yes, I do agree. My hon. Friend is right again about the lack of information in journals. The example I gave of the individual in Manchester is typical of what happens to universal credit claimants who get caught up with deductions and other aspects of the social security system that I want to see resolved. The Government have recognised some of the problems and have reduced the rate of deductions by lowering the cap and extending repayment periods, but that is not enough; significant reductions to already low incomes remain, and there is no affordability assessment to ensure that people can afford the payments.

What action can we take? Research from the Joseph Rowntree Foundation shows that support has eroded over decades, and that universal credit standard allowance is now at its lowest ever level as a proportion of average earnings. Together with the Trussell Trust, it is calling on the Government to implement an essentials guarantee to ensure that the basic rate of universal credit at least covers life’s essentials and that the support can never be pulled below that level.

Rather than offering one-off payments to shore up the incomes of struggling families, the UK Government should reverse the damaging policies impacting on our most vulnerable, including by reinstating the universal credit uplift of £25 a week, removing the benefit cap and the two-child limit, and halting punitive sanctions regime, which the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) outlined. In addition, the Scottish National party recommends that the Government immediately introduce an amnesty on deductions resulting from the Department of Work and Pensions’ own errors. Advance payment loans should be turned into non-repayable grants after a claimant has been deemed eligible, as the Work and Pensions Committee recommended in our report. Too often, we hear that advances are not loans, but if someone is paid money and is expected to pay it back, that is indeed a loan, not an advance.

We are also arguing for the cap on the monthly rate of deduction to be lowered, and for the widespread use of sanctions to be stopped, as there is clear evidence that they do not work. A London School of Economics study found that the impoverishment of larger low-income households has helped few parents to get a job, and is instead pushing families further into poverty and damaging their health.

I said at the start that I will intersperse my contribution with comments, examples and solutions from Scotland, so here are some. Social Security Scotland can take deductions from some benefits—the adult disability payment, the child disability payment and the Scottish child payment—to pay back an overpayment, but when overpayments occur, it engages with clients to discuss their circumstances and agree a payment plan that takes them into account. Its debt management strategy states:

“Where the repayment method is voluntary deductions from benefits, we will mutually agree a value with client as part of Affordability Assessment. Where enforced deductions are applied due to client not engaging with us to agree a payment plan, a maximum deduction of 10% of Scottish Benefit Entitlement will be applied unless the overpayment is due to Fraud, in which case a maximum of 15% will be applied.”

That social security philosophy and those actions work.

The Scottish National party believes that social security is an investment in the people of Scotland and a key part of the Scottish Government’s national mission to tackle child poverty. It continues to do everything it can with the limited powers and fixed budgets it receives from this place. That includes investing £5.2 billion in benefits expenditure in 2023-24, supporting more than 1 million people. I have stated clearly that we need to tackle child poverty. The Scottish Government’s tackling child poverty delivery plan estimates that 90,000 fewer children will live in relative and absolute poverty this year, as a result of the policies of the Scottish Government. However, the Scottish Government should not have to pick up the broken pieces left by this place, or keep using their limited powers and fixed projects to mitigate damaging Conservative party policies.

With every day that this Government fail to fix the known problems of universal credit and the social security system, and fail to use their reserve powers to tackle the rising cost of living adequately, they demonstrate that independence is the only way for Scotland to boost incomes and build a fairer society. The rest of the United Kingdom needs to fix its broken social security system; Scotland is already determined to do so.

[Dame Maria Miller (in the Chair)]

I remind Members that they need to be here for the full debate if they are going to take part. I was also going to ask Members to bob if they want to take part; I thank Members for doing that. I call Jim Shannon.

[Jim Shannon (Strangford) (DUP)]

My goodness! Thank you, Dame Maria. That threw me off. It is a pleasure to serve under your chairship for the second day running. It has come to the point when you and I are in Westminster Hall almost as much as each other. Well, maybe that is an exaggeration. It is also a pleasure to follow the hon. Member for Glasgow South West (Chris Stephens), who rightly brought forward this topic. We met on the Terrace this morning and he said, “Jim, will you come and do your bit?” and I said, “Does the Pope have red socks? Absolutely, I will be there. There is no doubt about it.” I am here to endorse what he said. A person from the food bank wrote me a letter, and I will quote the best part of it. He illustrates very well what happens, and why it is important.

I can well remember the fear at the outset of universal credit—the fear that people would be worse off, and that families would struggle. Boy, do they struggle. I am sorry to say that, but they do, because I witness it every day. I witnessed it on Friday in my office, with a person who had the same problem with universal credit. We were able to sort it, by the way. I find it incredibly hard to understand how universal credit works, and I am far from stupid. Once through the technical details and the machinations of the whole thing, one has to ask, “How on earth does anybody follow this?”.

For some, this fear has become a real struggle, and the deductions from an already sub-par universal credit is enough to push some families over the edge. I have seen that in my constituency office. My staff have a continuously good relationship with the social security offices round the corner. I have to put on record that they are brilliant. The number of problems that they have sorted out when my staff speak to them illustrates that they have grasped how the system works and how to get through it, but the ordinary person cannot do that. I have struggled to understand it as well.

It should be remembered that those who are unemployed or unable to work have a set rate that remains pretty stable. However, self-employed people have different work weeks, and the flexibility that universal credit was supposed to offer has resulted in deductions from overpayments. The hon. Member for Glasgow South West mentioned that, and I endorse it. The deductions are so hard to work out that families are left not even understanding how they owe money. It is incomprehensible.

The Minister understands. I am no different from anybody else here. Whenever we approach the Minister and explain the issues, he always tries to respond in a positive fashion. I appreciate that, and want to put that on record, because it is good to have a Minister who really wants to do things and help out. We are all working in our constituencies, advocating for our constituents, and we know well the issues that the hon. Member for Glasgow South West outlined.

I was contacted last week by the phenomenal manager of the local food bank, a man with the largest heart for helping families and vulnerable individuals. I want to read out his comments, as time permits. My speech is his letter to me, because it illustrates the issue really well. The hon. Member for Glasgow South West has friends and relatives in Newtownards. I know them—and think they vote DUP, by the way, so maybe they are not nationalists.

[Chris Stephens]

Not a chance.

[Jim Shannon]

I think they do; he does not know them as well as I do. The letter states:

“As a food bank operating in Newtownards, we are writing to you to raise our concerns about rising numbers of people in our community who are needing to turn to food banks, like ours, because they cannot afford the essentials we all need to survive.”

These are his words: “This is not right”. I say amen to that.

“In the last financial year we saw a 30% increase in clients coming to the Newtownards Foodbank compared to the previous year. We are aware that our summer has started really busily with an average of 24 different families attending each week since June in what is normally our quieter spell.

Many attendees are struggling with the inability to feed there families and provide fuel for their house needs. A significant proportion are actually working but their outgoings outstrip their income. Those on benefits clearly don’t get enough to match their basic needs.

While the cost of living crisis and the pandemic have placed additional pressures on incomes, this year’s rise is part of a longer-term trend in levels of need. Support has eroded over decades and the basic rate (‘standard allowance’) of universal credit is now at its lowest ever level as a proportion of average earnings. Alarmingly, the number of parcels provided this year is more than double the amount distributed five years ago.”

I will say that again, because that is an important line:

“Alarmingly, the number of parcels provided this year is more than double the amount distributed five years ago.

No one should be forced to turn to a food bank because they cannot afford essentials, including food. We provide immediate support to people in our community when they are struggling the most, but our vision is for a world where food banks, like ours, don’t need to exist.”

I said that in an intervention on the hon. Member for Glasgow South West. That is his vision, mine, the vision of every Opposition Member and, I hope, of the Minister. The letter also says:

“Research by the Trussell Trust shows that inadequate social security is the main driver of food bank need and there is a known link between issues with the benefits system and food bank use. This can and must change.

Alongside the Trussell Trust, we are calling for our social security system to Guarantee Our Essentials by making sure that the basic rate of Universal Credit is at least enough to afford the essentials we all need, such as food, energy and basic household goods – and that deductions can never pull people below this level.”

He asks me:

“Will you support the principle that, at a minimum, Universal Credit should always protect people from going without the essentials?”

That is Richard’s letter to me this week. I will say on the record that I fully support what he said.

--- Later in debate ---

[David Linden (Glasgow East) (SNP)]

It is a pleasure to serve under your chairmanship, Dame Maria. I thank my very good friend, my hon. Friend the Member for Glasgow South West (Chris Stephens), for securing this timely debate. I say “timely” because it is almost a year to the day since I raised a similar issue in the Chamber. With that in mind, it is incredibly worrying that the situation outlined today has not improved. Instead, it has continued to spiral out of control, thanks to the British Government’s inaction.

I have listened with great interest to the contributions made this morning. Given the announcements this week, there is no better time to stress the damage that has been caused by this fatally flawed universal credit system. Last week, Citizens Advice published new data showing that families are operating in negative budgets, which means that their income no longer meets the basic costs of covering food, energy and housing. According to its latest analysis, two in 10 households have £100 or less after paying for monthly essentials, and of the 40,000 people who Citizens Advice sees with debt problems, over half cannot be helped, as they have already cut back so much on the bare essentials.

This all comes as a result of an austerity agenda pursued by the British Government—a Government who refuse to make the necessary change to universal credit deduction rules, despite households facing severe financial destitution and uncertainty. As we have heard today, the impact of deductions is significant and all the more pertinent to our constituents as they continue to be gripped by the cost of living crisis.

As my hon. Friend the Member for Glasgow South West said, the average Scottish household has had £59 deducted from their universal credit. In a cost of living crisis where every single penny counts, that is the difference between putting food on the table and having to go hungry. As he outlined, the deductions affect almost half of Scottish households on universal credit, with the DWP clawing back around £12 million a month. Nearly half of those deductions are to pay back universal credit advance payments because struggling households cannot wait five weeks for their first payment. This is a system that is fundamentally flawed.

It is therefore no surprise that since January this year, 60% of universal credit claimants whom citizens advice bureaux have helped with deductions have also required help accessing food bank or emergency charitable support. Trussell Trust data indicates that people with deductions were around twice as likely to go without food, toiletries and utilities as those on universal credit without deductions, and over two thirds of people in Scotland who were referred to food banks in the Trussell Trust network in receipt of universal credit were facing a deduction.

Furthermore, the latest statistics from Citizens Advice show that, of the 84% of people who had their benefits deducted, 43% have had to borrow money to cover the essentials. In addition, the Child Poverty Action Group reported that more than 2.2 million children are living in households with debt deductions from their universal credit. I know from speaking to constituents in Parkhead, Shettleston and Tollcross that the uncertainty of how much a deduction is or when it will be taken causes significant and, most importantly, unnecessary hardship for claimants.

In their reports, charities refers to universal credit deductions as “wiping out people’s finances” and

“trapping them in a spiral of debt”.

“Trapping” and “spiralling” are words that I would never wish to associate with a social security system, yet the system that this Conservative Government have designed and presided over continues to push individuals into a never-ending cycle of debt and financial insecurity. As a number of Members have stressed, the British Government are subjecting vulnerable people to heinous deductions that push them into further debt and destitution. Debt, in and of itself, has a profound impact on the cost of living, and that is only exacerbated by this broken system, which is forcing people to make impossible choices that amount to their being unable to even meet the most basic needs.

When the root cause of the issue is poor system design, it is astounding that the Government continually refuse to make the necessary changes to rules around deductions. We are faced with a British Government in denial, who do not believe

“that pausing deductions by default is necessarily in the claimant’s best interest.”

What is it about being unable to afford basic food, buy household essentials or heat their home that is in the claimant’s best interests? People are already diverting limited resources towards debt repayments and that is only compounded by unexpected deductions.

Despite continued and constrained resources, the Scottish Government are doing what they can to mitigate the impact of this broken system, but the root cause undeniably starts here in Westminster. We know the Government can make solutions and immediate changes today that would make a huge difference to those struggling the most and make our constituents’ lives somewhat more manageable, as so many continue to face impossible household budget decisions. Those changes need to be made sooner rather than later, as millions face food insecurity, soaring debt and unnecessary hardship.

[Chris Stephens]

My hon. Friend is making an excellent speech. We must ask the Minister to consider the need for some discussion between claimants and the DWP, particularly where the DWP’s own errors are causing the deduction. Does my hon. Friend agree that there needs to be a discussion about an affordability assessment between the claimant and DWP in future?

[David Linden]

I thank my hon. Friend for his intervention. When the permanent secretary of the DWP gave evidence to the Work and Pensions Committee, I raised the issue of the recovery of some of the payments. The permanent secretary acknowledged at the time that despite the heavy-handed wording in the DWP’s letter, there was scope for a discussion between claimants and the Department. The fact that the Department has not been willing to amend the text of that rather hard-hitting letter makes the point.

We have a broken social security system that is perpetuated by the UK Government. Moreover, I say to the shadow Minister, the hon. Member for Reading East (Matt Rodda), that there is no point in his party winning the election and coming into Government but continuing the policies of this Government. He and his party should be thoroughly ashamed of being thirled to a two-child policy and an associated rape clause that is the very opposite of what the Labour party should stand for. The hon. Members for Birkenhead (Mick Whitley), for Leicester East (Claudia Webbe) and for Liverpool, West Derby (Ian Byrne) are good socialists who are appalled by the policy. If the hon. Member for Reading East wants to stand up and take the opportunity to apologise for his party pursuing a policy that is tantamount to social engineering, I will be happy to hear that. If he does not do so, my constituents will conclude that the only way to ensure we do not have disgraceful social security policies is with the powers of independence, because this lot clearly have nothing different to say.

--- Later in debate ---

[Guy Opperman]

I certainly will do that, and I will also have a look at the individual letters that apply in those particular circumstances. All such letters, as the hon. Gentleman will know having done the pensions job for five long, lovely years, are kept under review, and there is the opportunity to do that.

The hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) is no longer in her place—I know she has to be elsewhere—but she raised in particular the issue of access to a journal for those who do not have the internet. Again, we need to make it clear that, obviously, an individual claimant can attend a jobcentre, which has computers that claimants can use to access their universal credit claim and their individual journal, or they can speak to a member of staff who can support them through the process.

[Chris Stephens]

Will the Minister give way?

[Guy Opperman]

Bear with me. I might give way, but I am going to keep trying to make progress. The hon. Gentleman had 20 minutes and will have more time soon.

Much criticism was made of DWP staff, particularly by the hon. Member for Leicester East. She used various expressions that I utterly reject. I will not dignify them by repeating them, but I want to make it utterly clear that I am proud to work with the 25,000 men and women who work in our 700-plus jobcentres up and down the country. They do a fantastic job in trying to assist everybody. When she impugns the individual character of DWP staff, I am afraid she is utterly wrong. She should reflect on that and visit her local jobcentre.

--- Later in debate ---

[Chris Stephens]

I think the Minister said I had 20 minutes to sum up, but you might have something to say about that, Dame Maria. I thank the hon. Members for Strangford (Jim Shannon), for East Londonderry (Mr Campbell), for Rutherglen and Hamilton West (Margaret Ferrier), for Birkenhead (Mick Whitley), for Arfon (Hywel Williams)—as I was reminded by him, he has a sophisticated electorate, given its electoral history—for Liverpool, West Derby (Ian Byrne) and for Leicester East (Claudia Webbe). I also thank the Front Bench spokesmen.

I thank the Minister for his kind words in referring to me as his good friend—that will probably get me deselected during the summer when I seek to secure selection again. I also thank him for mentioning the great Frank Field. Frank was at an event in Parliament this week, alongside Feeding Britain and Good Food Scotland, and he told me that he agrees with me on universal credit deductions. I hope the Minister will take that on board.

In reply to the Minister, it starts with a five-week wait, and the Government will really have to deal with this situation whereby we are handing out loans. They are not advances; they are loans. I ask the Government to look at how quickly they can pay a benefit as soon as someone hits the eligibility criteria.

As the hon. Member for Reading East (Matt Rodda) says, the real issue is the scale and the number of deductions now taking place. Like others, I ask the Minister to look at what happens when there is a departmental error. The Department really needs to look at the information that has been provided on the online journal and have that discussion. My hon. Friend the Member for Glasgow East (David Linden), who is a good friend—that will not get him deselected—rightly said that the Minister said he would look at the communication. That also needs to be about the information given to claimants, and I ask him to look at that and come back to us. Affordability assessments should be standard practice.

The Minister did not address the crucial point: since the Government have eased the deductions and made their changes, there has been a cost of living crisis. That is why we are asking him and the Government to look again at easing the rate of deductions, which we think will help the situation.

Every single Member has spoken about food poverty and has given examples of how deductions are causing it. I am on a crusade—a mission—to end food poverty across these islands, which is why I have introduced a private Member’s Bill to that end. One way to end food poverty is to address the universal credit deduction situation. I hope that the Minister will do that during the summer, because if he does not, we will be coming back and having another debate.

Question put and agreed to.

Resolved,

That this House has considered the matter of Universal Credit deductions.