AN ESTIMATED 1.8 MILLION HOUSEHOLDS on universal credit (UC) are having to live on significantly less than they are entitled to because the DWP is deducting debt repayments from their benefits at an unaffordable rate, according to new Child Poverty Action Group (CPAG) estimates. There are an estimated 2 million children in these households. 

The charity says the current deductions rules are draconian and must be changed to stop families from falling into deep hardship as costs soar.

Automatic deductions from benefits can be taken for a range of debts including to utility companies, but most are to repay debts owed to the government itself. These are for historic tax credit overpayments or a UC advance, which claimants can arrange to get them through the five-week wait for a first UC payment. Deductions reduce UC awards by £61 a month on average but a couple-family with children with deductions at the maximum rate will see their income reduced by £131 a month.

CPAG is calling on Government to reduce the maximum rate at which deductions can be taken for repayment of a government debt (ie for a UC advance or historic tax credits overpayment) to five per cent of a claimant’s benefit.  And it wants the overall cap on deductions (for any type of debt) to be reduced from the current 25 per cent to 15 per cent.

The Chief Executive of Child Poverty Action Group, Alison Garnham, said: “With soaring prices and working-age benefits at their lowest level for 50 years, families on UC are down to the bone.  Draconian deduction rules are making a dire situation even worse.  Most people repaying a universal credit advance had no option but to ask for that money upfront but then repayments leave them struggling even further. The department must reduce the deductions rate now, to prevent more families from becoming desperate.”

Across Britain, over a six month period the DWP takes around £483 million from claimants to repay UC advances or historic tax credit overpayments – only slightly less than the £500 million that was allocated to help the most vulnerable with the cost of living in the Spring Statement when the Household Support Fund was extended.

In addition to reducing debt deduction rates, CPAG says benefits must be uprated in line with inflation this Autumn to help low-income households cope with the spiralling cost of essentials. An uprating of 10 per cent to match the Bank of England’s inflation forecasts, would mean a couple with two children on UC would have another £101 a month and a lone parent with one child would have another £58 a month before winter.

DWP statistics published on 17 May show a total of  4.1 million households claiming UC across Great Britain including 3.8 million children.: 896,000 of these households include a child aged under five.

* CPAG’s estimates of the number of households having deductions are based on the latest DWP statistics on universal credit, which are here.

* Read the Briefing Reducing Deductions: the first step in a package of support for low-income households here.

* Source: Child Poverty Action Group