Universal Credit Deductions

Matt Rodda Excerpts

Wednesday 19th July 2023 Westminster Hall

[Matt Rodda (Reading East) (Lab)]

It is a pleasure to serve under your chairmanship, Dame Maria. I, too, congratulate the hon. Member for Glasgow South West (Chris Stephens) on securing today’s debate. The issue of deductions is both incredibly important and sadly often neglected. We often discuss the adequacy of social security as if it were simply a matter of looking at the value of benefits, which has fallen in real terms since 2010 as a result of below-inflation uprating and freezes. However, that is only part of the story.

As we have heard today, we cannot assume that people are even getting the amounts set out in benefit rates. About 2 million households, or about 42%, on universal credit have their benefits reduced below the standard rates every month to repay debt to the Government. Deductions and debt to the Government are at a scale we have never seen before and have become a routine aspect of social security administration under the current Government, and I am afraid to say that that major change to the benefits system has largely escaped scrutiny.

The official Opposition are not opposed in principle to deductions, but the problem is the scale. There will probably always be a need for benefit deductions in social security. For a start, it is unlikely that any system will ever completely eliminate incorrect benefit payments, and taxpayers expect overpayments to be recovered wherever possible. There is also—views differ on this—a role for repayable loans to smooth out the pressure of unpredictable costs, as other hon. Members have said.

We need to recognise that deductions cause hardship for many families that, by definition, are on very low incomes. The Trussell Trust reports that 57% of universal credit households that use food banks face deductions—we have heard accounts of that today. Its evidence shows that 50% of people on universal credit with deductions have had more than one day in the previous month either having only one meal or having gone without eating altogether. That compares with 26% of those without deductions. The Joseph Rowntree Charitable Trust has shown that decisions particularly hit families with children and people with limited capability for work, more than half of whom face deductions.

There is little doubt that, in the middle of the worst cost of living crisis for decades, benefit deductions are pushing families that are already struggling into destitution, as hon. Members have said. I hope Members from across the House agree that, as far as possible, the Government should aim to minimise deductions, but unfortunately the opposite seems to be happening. Nearly half of all universal credit households face deductions each month, so we need to recognise that the system is not working as it should.

One of the main reasons for that is the timing of universal credit payments—a problem that the Government were repeatedly warned about at the design stage of UC. Families have to wait five weeks for their first universal credit payment, and somehow the Government persuaded themselves that that would not be a problem for the great majority of families claiming because they would have a pay packet or savings to tide them over. According to the Department for Work and Pensions, about 60% of people making new claims for universal credit have had to take out an advance, and as of February this year, 732,000 households were paying off new claims advances.

In addition, more than 900,000 universal credit families are facing deductions for budgeting advances. In other words, nearly one in five of all UC households have had to take out a loan to get through the month. We were promised that universal credit would deal much better with fluctuations in income and need than the benefits it replaced. The fact that so many people need to take out budgeting alternatives shows that that is unfortunately far from the case.

Although deductions may be a necessity, there is no excuse for using them as a default mechanism to deal with problems that the Government have failed to address. Ministers should be trying to minimise deductions by addressing those problems at source, but that is the opposite of what the Government have actually been doing. Where deductions are unavoidable, the Government need to manage them much more sensitively, as we have heard pleas for today, and take into account households’ circumstances.

Qualitative research by the Trussell Trust states:

“Many people who have experienced government debt repayments were not supported to understand the situation they were in”—

that is a crucial point.

“They didn’t know why the money was owed, they didn’t know how much they needed to repay, and they didn’t know how long the repayments were going to last. Of particular concern was that they also didn’t know what—if any—options or choices were available to them.”

Given that deductions cause genuine hardship for so many families, we should expect the DWP to adopt a high standard of customer service. It should proactively contact claimants—I hope the Minister will address that point—take into account affordability and ensure claimants are fully aware of the scale of debt and the options available to them, but improving customer service can go only so far. Debt and deductions are playing a much bigger role in social security than they have in the past, largely because of the failure of universal credit to live up to the claims that were made for it. We should not welcome that situation at the best of times, and certainly not in the middle of the worst cost of living crisis in a generation.

--- Later in debate ---

[David Linden]

rose—

[Matt Rodda]

rose—

[Guy Opperman]

I will give way to the hon. Member for Glasgow East (David Linden). The hon. Member for Reading East has had his say.