Duncan Shrubsole, our Director of Policy, Communications and Research speaks out to the All Party Parliamentary Group (APPG) on Universal Credit about the problem of deductions.
27 May 2022
There is much discussion at the moment, rightly so, about the cost of living crisis and particularly the need to increase benefit payments to help people weather this latest storm. With inflation and bills soaring, the amount of money people receive from benefits just isn’t enough to live off. Yet for many people on Universal Credit, they don’t even receive this already-too-low rate of benefits: they are subject to deductions from their Universal Credit payments.
This week, Duncan Shrubsole, our Director of Policy, Communications and Research spoke to the All Party Parliamentary Group (APPG) on Universal Credit about the problem of deductions. That is, payments that government take from Universal Credit awards that reduce the amount of money people receive. The APPG brings together MPs and Peers who are interested in learning more about Universal Credit and how it impacts people. It provides a forum to discuss key issues and helps to build support for reform.
The APPG followed the publication of our new report about deductions from Universal Credit – Deductions: Driver of Poverty and was a chance for us to share more about the problems with deductions, why they matter and, importantly, what Government should do about it.
Almost half of people receiving Universal Credit have money deducted from their benefit payments. This is money that government deducts automatically to ‘repay’ past administrative errors by government or advance payment loans that people had to take out to cover the five week wait when moving into Universal Credit, for example. The Government takes this money without any regard to people’s circumstances or ability to repay. They also take it without telling people what is being taken, why or for how long – leaving people confused and often unable to budget.
With deductions taken of up to 25% of already-low Universal Credit payments, people are left without enough money to even cover the essentials. As prices for these essentials continue to rise, it is those people already on the lowest incomes that are facing the biggest impacts of the cost of living crisis and can drive people into a downward spiral of debt just to get by. The impacts can be far-reaching – as research by Trussell Trust, who also spoke at the APPG, highlighted.
Deductions were a problem even before the cost of living crisis hit. This latest crisis makes reforming the system even more urgent. Government could convert advance payments from loans into grants. They could reduce the maximum deduction from 25% to 5%. Or they could suspend deductions completely during the crisis, building on their response to the Covid pandemic, before introducing longer term reforms. These would all be a way to make sure those on the lowest incomes receive targeted support quickly during the crisis, whilst also reducing the harm for the long term.
Government should also introduce changes that ensure where deductions are made, people are better able to understand and manage them. Introducing affordability assessments, as is common practice for commercial lenders, and raising awareness of where waivers can be applied would go some way to ensuring that deductions don’t leave people destitute. Other systems, such as student loan repayments, set a threshold before people have to start paying back, recover at a lower rate and set a point where any outstanding debt is written off – so why not apply these same principle to the systems affecting those already on the lowest incomes?
Finally, Government should write off historic tax debt. People often have no idea these exist until they move into Universal Credit – and in the majority of cases this results from overpayments made years earlier due to administrative and system errors by Government itself. And even now under Universal Credit, 75% of the deductions that are made to recover overpayments are still the result of Government’s own errors – it is unfair that it is the claimant who bears the brunt.
Our report includes more details about deductions and how Government can take action to support those people facing the greatest challenges. Not doing so now will only drive up costs in the long term – both in economic and human terms as deductions impact on mental health and increase the need for crisis support. Conversely acting to change the system would get much needed cash into the pockets of two million of the poorest citizens.
We’re going to be continuing to share our report with government and look for opportunities to work with partners to push for reforms. While the cost of living crisis doesn’t look to be going away any time soon, taking action on deductions would mean targeted support reaches those who need it most quickly and effectively.
