Millions of Universal Credit claimants warned DWP could be deducting money | Personal Finance | Finance

Half of those on universal credit are losing part of their payments due to automatic deductions by the Department for Work and Pensions (DWP), according to recent research by the New Economics Foundation (NEF).

Claimants are losing £1 in every £13 of their basic payment to repay debts to private landlords, utility companies, and to correct mistakes made by the tax office.

Each household with money deducted lost an average of £63 a month, amounting to a total loss of £1.3 billion from benefits support in the 2022-23 fiscal year.

Annie, a single parent of two in north-east England, is one such claimant.

Speaking to The Guardian, she explained that she receives disability benefits due to mental health issues that leave her unable to work.

Annie is part of Changing Realities, a project documenting the lives of low-income parents and carers in the UK.

She has £66 deducted monthly from her benefits payment of £660 to repay a budgeting loan from the DWP.

This loan helps cover extra costs at the beginning of the school year and during the Christmas holidays.

However, these deductions have left Annie struggling to meet basic needs.

She often skips meals to ensure her children are fed and cannot afford new shoes while her children need new school shoes.

“That’s an extra £66 that could go towards the food budget, or the children could join clubs. Right now, fruit is a luxury, meat is a luxury,” she said.

The impact of these deductions varies across the country.

In Blackpool South, two-thirds of households receiving universal credit have money deducted from their payments, almost double the proportion in South West Devon, the least affected constituency.

NEF argues that benefits deductions trap households in a cycle of debt, exacerbating financial struggles and negatively impacting mental and physical health.

Sam Tims, a senior economist at NEF, said: “Cuts to already meagre levels of universal credit have made it harder for people to afford the basics like food on the table and a warm home.

“The mental and physical strain this creates makes it more likely that they will be forced to take time off work.”

The DWP responded by noting that deductions are capped at 25% and used as a last resort to help claimants clear debt.

However, the NEF insists that the current approach is counterproductive.

Tims added: “If we want an economy that allows everyone to thrive, the next government must guarantee that social security covers people’s essentials and ensure this guarantee isn’t undermined by the pursuit of debt.”

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