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On 25 September 2024, in her first
speech to the Labour party conference as the UK’s new work and pensions secretary, Liz Kendall MP spoke of tackling child poverty as her ‘personal priority’ and echoed Labour’s
manifesto commitment to review universal credit (UC) so that it ‘tackles poverty’.
If Labour is serious about this mission, it will need to turn its attention to how the Department for Work and Pensions (DWP) approaches deductions from UC.
There has rightly been increasing focus, thanks to the work of the
Joseph Rowntree Foundation and the
Trussell Trust among others, on the inadequacy of benefit rates to meet an individual’s basic needs.
1Lucy Bannister et al, An essentials guarantee: reforming universal credit to ensure we can all afford the essentials in hard times, Trussell Trust/Joseph Rowntree Foundation, February 2023. However, data shows that the majority of UC households are receiving below even these rates due to deductions made to their payments.
2In 2022/23, 55 per cent of universal credit claims were subject to at least one deduction: HL Written Question UIN HL1702, 17 January 2024; answered 31 January 2024. In August 2023, these households included 2.3m children.
3HC Written Question UIN 5974, 8 December 2023; answered 13 December 2023.These deductions relate to the recovery of debts owed to the government or certain third parties, including for overpayments caused by mistakes made by the DWP.
For the past three years, Public Law Project (PLP) has been supporting claimants to challenge refusals of requests for waiver of debts recovered by deduction, alongside researching their impact and the barriers that claimants face when trying to challenge them or access discretionary relief. The findings from this work are now captured in a new research report,
From pillar to post: barriers to dealing with deductions from universal credit (Jagna Olejniczak, PLP, 19 September 2024).
‘It was a lot to us’
The research includes a survey, conducted in partnership with Walnut Unlimited, of 500 people who reported having had deductions made to their UC payments. Findings included that, as a result of those deductions:
•a third of respondents became destitute;
•42 per cent reported that their mental health had been negatively impacted, and 30 per cent that their physical health had been negatively impacted;
•21 per cent had to delay bill repayments, 21 per cent took out additional loans, 19 per cent had to borrow money from family and friends, and 12 per cent used a credit card or overdraft; and
•nine per cent reported that they had slept rough for one or more nights.
‘This wasn’t our fault’
Interviews also highlighted a sense of injustice when individuals were faced with a sudden reduction in income, not as a result of any action or inaction on their part, but due to government mistakes. In 2021, 75 per cent of UC overpayment debts on the DWP’s debt manager system were recorded as due to ‘official error’.
DWP research and casework shows that this has included recovery when individuals have repeatedly checked, and received assurances from the DWP of, their entitlement to payments before spending them, a context that was the subject of a successful judicial review by a PLP client in 2023.
4R (K) v Secretary of State for Work and Pensions [2023] EWHC 233 (Admin); September 2023 Legal Action 41.A discretion rarely exercised
The DWP has a discretion over whether to recover overpayments and the rate at which to do so (up to a maximum cap), but its default approach is to recover all overpayments, however caused, at the maximum permitted rate. It relies on individuals raising concerns about affordability, harm or unfairness after an initial deduction is made.
If individuals do contact the DWP, they can request reductions in the rate of recovery or even a waiver of the debt. However, PLP’s research found that people face significant barriers in doing this, experiencing a fragmented system that requires them to navigate between different departments, organisations and legal frameworks. Limitations in information, and the context in which debts were incurred, meant they were left unclear about what was being recovered and why, and what options were available.
A better way
Action is needed to reduce the default rate at which deductions can be taken from UC payments. Before deciding to recover an overpayment, the DWP should also carry out proactive assessments of claimants’ individual circumstances, the context in which the debt was incurred and their ability to repay. In addition, urgent action is needed to improve coordination between different departments and organisations, and the quality of information provided to claimants – including telling people directly about the measures available to them.