Universal Credit Deductions

Maria Miller 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.

--- Later in debate ---

[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.

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[Ian Byrne (Liverpool, West Derby) (Lab)]

It is a real honour to serve under your chairship, Dame Maria. I thank my good friend, the hon. Member for Glasgow South West (Chris Stephens), for securing this important debate and for his excellent speech, and other hon. Members for their fantastic contributions.

The DWP has the power to make direct reductions from benefit payments to pay certain debts and costs owed by an individual. This can include money paid to the Government due to a benefit overpayment, or a loan to a third party such as a landlord, utility provider, local authority or the courts. It is worth noting that the majority of benefit deductions are for DWP debts, including those related to universal credit advance payments, overpayments and budgeting loans.

I want to draw attention to several factors of universal credit deductions that seem to be having an extremely negative impact on my Liverpool, West Derby constituents. First, many new universal credit claimants now take out an advance while they wait for their first payment, and the advance is usually recovered by deductions of equal instalments over a period of 24 months. The pain that our constituents are facing right across the UK has been outlined today, but taking out that advance payment seems to be actively encouraged by the DWP. Secondly, when someone moves on to universal credit, any outstanding tax credit debt is now transferred to the DWP, allowing it to recover the debt through any of the methods available to it, which are far more extensive than those available to His Majesty’s Revenue and Customs. Universal credit rules allow the DWP to make deductions for overpayments caused by DWP error, which was not the case with legacy benefits.

A major area of concern with deductions is the basic premise of affordability. It is staggering that there is no requirement for the DWP to determine whether someone can actually afford a deduction, or to consider what that deduction would do to their and their family’s life. From the weekly emails I receive from desperate Liverpool, West Derby constituents, and from speaking to people in my surgeries, it is plainly clear that many simply cannot afford the deductions enforced on them The levels of universal credit deductions faced by far too many of my constituents, including extremely vulnerable people, are causing them to struggle to pay for essentials such as heating, fuel, food and toiletries—the very essentials of life. It is driving them into absolute, abject poverty.

At the mobile food pantry that we run in Liverpool West Derby every Friday with Fans Supporting Food Banks and St Andrew’s Community Network, I hear many stories of people being forced into using emergency food aid as a result of DWP deductions. This is replicated across the city at the other five services that we run, and the pattern repeats across the UK, as we have heard from Members today. The Government argue that their deductions can help claimants to better manage their finances, but in December 2022 the Trussell Trust reported that more than half of all universal credit claimants who experienced deductions in their benefits had one day when they could not afford to eat at all or only had one meal because they could not afford to buy enough food in the previous 30 days. We need to remember that we are the sixth richest country in the world, and to drive people into these circumstances is completely immoral.

The Trussell Trust highlighted new research showing that 47% of people referred to food banks had faced deductions to their or their partner’s benefits income to pay back a benefit advance, benefit overpayment, DWP loan, or any other debt or fine. That rose to 57% among those referred to food banks who were in receipt of universal credit. In its June 2023 report, “The welfare debt trap: Adjusting the level and priority of deductions from benefits to prevent hardship”, Citizens Advice found that the deductions have created hardship and are applied disproportionately to households in which someone has at least one long-term health condition or disability and to households with children, which are also more likely to have deductions applied at a higher level. Those people are the most vulnerable.

The current system of deductions clearly targets our most vulnerable citizens and is driving millions of people into poverty. It is supposed to be a safety net. Let us be crystal clear—amazing, I can see the Minister puffing his cheeks— that the current universal credit deductions system is not fit for purpose and needs fixing urgently. Where do we go from here? I urge the Minister to take the following measures into consideration for the benefit of the huge number of people, many extremely vulnerable, who are suffering as a consequence of these actions. The DWP must place affordability at the heart of deductions and prioritise the reduction of the total amount being deducted from households. At the heart of the calculations must be the basic human right every citizen should have: to be able to afford food, water, shelter, clothing and heating. The DWP must not be allowed to push people into abject poverty.

The Government must provide immediate breathing space for low-income households that are under extreme pressure due to the cost of living crisis. The priority order for deductions must be changed to put greater emphasis on debts where non-payment has the most serious consequences and less emphasis on debts to the Government. The Government must get serious about helping people not to accrue debts in the first place, especially through the use of advanced payments or loans. Deductions for overpayment owing to DWP error should not be made. Minister, my door is always open to discuss how a right to food could be implemented to tackle the scourge of food poverty, which we see across all our communities and have heard about so bleakly today. The ball is firmly in his court.

[Dame Maria Miller (in the Chair)]

We come to the last Back-Bench speech and will then move to Front-Bench contributions at 10.28 am.