Universal Credit Deductions

Jim Shannon Excerpts

Wednesday 19th July 2023 Westminster Hall

[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.

--- Later in debate ---

[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.

[Mr Gregory Campbell (East Londonderry) (DUP)]

My hon. Friend has succinctly summed up the issues in the letter from his constituent. Does he agree that faith-based food bank providers in my constituency, his and others are doing excellent work, and that most people in society, including universal credit recipients, support the principle of the universal credit system, which is to encourage people back into work? The problem is that when there are deductions, and almost a penalistic regime, people suffer. That problem must be solved in our society, because people are being driven further into poverty, rather than lifted out of it.

[Jim Shannon]

My hon. Friend has succinctly made his case in his intervention. The key issue for the Minister—this is from me, the hon. Member for Glasgow South West, who set the scene very well, and, I suspect, everybody on the Opposition Benches—is that there is a delay in the system, and difficulty understanding the system. Whenever we go to the local office, the office manager and staff can respond, but there are many people other than those who come to us—and there are many who come to us, by the way; many come to the office with this issue, because they still cannot understand it. We are asking the Minister for the extra help that is quite clearly needed. There is also the five to six weeks’ delay that many people seem to have. Whenever they earn more money, they fall back down again. They are often sick, and their housing benefit is so complicated; it is almost hard to try to comprehend it.

[Margaret Ferrier]

The hon. Member has talked about budgeting. For many, short-term budgeting is a necessity. The housing element of universal credit is paid directly to claimants, not landlords, which contributes to an entirely foreseeable problem. Does he agree that, especially given soaring living costs, it would help claimants budget if we removed the direct payment of this element to claimants?

[Jim Shannon]

The hon. Lady has demonstrated clearly the complications of this system, and others will, too, because they have the same knowledge and interpretation of it as I have.

I will finish with this. My answer to Richard, the manager of the food bank, is clear: yes, I support what he said. I hope that his letter has clearly illustrated what is needed. Will the Government support that, make things easier for my constituents and do things differently? I hope that the answer to that is also yes; I am sure that it will be. Families—my constituents in Strangford, constituents across the whole of Northern Ireland, and constituents across this great United Kingdom of Great Britain and Northern Ireland—must be able to depend on their Government, rather than their local food bank. That is my story today.

--- Later in debate ---

[The Minister for Employment (Guy Opperman)]

It is a pleasure to serve under your chairmanship, Dame Maria. I congratulate the hon. Member for Glasgow South West (Chris Stephens)—my good friend, and I apologise for calling him that, as I realise he will get some opprobrium for it, but we are friends, albeit our views differ—on securing the debate. It is a pleasure to answer on behalf of the Government.

We recognise the importance of supporting claimants to manage their financial obligations, and the deductions policy in universal credit provides a co-ordinated approach to providing that support. There is much that I want to address today, but I will start with the basics: employment is up, vacancies are down, economic inactivity is down and we are pleased to see that inflation has fallen today.

The Government believe that we should continue to have a sustainable, long-term approach to tackling poverty and supporting people on lower incomes. The primary aim of the universal credit deductions policy is to protect claimants by providing a last resort repayment method for arrears of essential services, and to ensure obligations are enforced. It is important to strike the right balance between ensuring protections are in place and allowing claimants to retain as much of their benefit as possible for their day-to-day needs, while understanding that although the taxpayer expects us to recover overpaid benefit debt, that must be done without causing undue hardship.

It is worth remembering that people who are on disability benefits and pensioners have never been more supported. Welfare has never been more supported. Colleagues will be aware that state pensions and benefits were uprated by 10.1% in April this year, the national living wage was increased by 9.7% to £10.42 an hour, and other support includes the energy price guarantee, the household support fund and the various cost of living payments, which I will go through in a little more detail. It is not right to look at universal credit through the prism of what it provides because, for those who require extra support, there are the cost of living payments—£94 billion over 2022-23 and 2023-24—as we continue our support for the most vulnerable households.

Over 8 million UK households on eligible means-tested benefits will receive additional cost of living payments totalling up to £900 in this fiscal year. The first £301 payment was made in April and May this year. Two further payments of £299 and, I believe, £300 will follow this autumn and in spring 2024. That is £900 additional support over and above the universal credit support that is provided.

In addition, 6.4 million people on eligible extra costs disability benefits have also recently received a further £150 disability cost of living payment. In 2023-24 we will spend £276 billion on Great Britain’s welfare system, including £124 billion on people of working age and children. Much criticism was made in the debate, which I have taken on board, but those sums have never been higher.

There is also approximately £30 billion for supported housing. Again, a criticism was made that we do not provide enough for that. I remind colleagues that 1.4% of GDP goes on supported housing. That is by a significant margin the largest sum in the OECD—the next highest is 0.9%. Those are the consequences of decisions made to support individuals on an ongoing basis.

Much was made of the deductions policy, which I will try to address.

[Jim Shannon]

Will the Minister give way?

[Guy Opperman]

I will always give way to the hon. Gentleman.

[Jim Shannon]

The hon. Member for Glasgow South West (Chris Stephens) referred to the deductions and the data he had received for England, Scotland and Wales. He had asked for the same information on the deductions in Northern Ireland, but for whatever reason that was not available and I do not understand why. Can the Minister use his powers to enable us to have that data?