Universal Credit Deductions

Margaret Ferrier Excerpts

Wednesday 19th July 2023 Westminster Hall

[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.

[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.

--- Later in debate ---

[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.