Benefit deductions for debt can more than offset the £20 ‘uplift’ to universal credit, sending families deeper into poverty

Covid Realities research programme calls on government to write off historic tax credit overpayments and convert advances to non-repayable grants

Benefit deductions for debt can more than offset the £20 'uplift' to universal credit, sending families deeper into poverty, according to a new report from the Covid Realities research programme.

In Advance to debt: Paying back benefit debt - what happens when deductions are made to benefit payments?, the report's authors - Dr Ruth Patrick from the University of York and Tom Lee, Senior Policy Analyst at the Child Poverty Action Group - point out that deductions can be taken from benefit payments for a range of reasons including repayment of universal credit advances, legacy benefit overpayments, budgeting loans, rent arrears, utility bills and mortgage interest. While the government temporarily paused recovery of benefit overpayments in April 2020 in response to the Covid-19 pandemic, this did not apply to recovery of advance payments and, in any event, all recovery was recommenced in July 2020.

Highlighting that, 'inevitably and unsurprisingly', debt deductions push families further into debt, the report sets out that - 

• 41 per cent of universal credit claimants have a deduction from their benefit for debt, but this increases to 63 per cent for the cohort of universal credit claimants who first claimed between March and June 2020 at the start of the pandemic;
• for some, the level of deductions more than offsets the £20 'uplift' to universal credit introduced by the Social Security (Coronavirus) (Further Measures) Regulations 2020 (SI.No.371/2020); and
• repaying an advance can increase the poverty gap (how far a household in poverty is below the poverty line) for a couple with two children from £400 per month to £500 per month; where there are other deductions in place as well, the poverty gap can be as high as £579 per month.

As a result, while agreeing with the many calls to maintain the £20 'uplift' and extend it to legacy benefits, the report also says that there is a parallel and equally urgent need to look at the impact and reach of debt deductions, and it therefore calls on the government to - 

• convert advance payments of universal credit to non-repayable grants; and
• write off historic tax credit overpayments after a period of 2 years.

For more information, see Advance to debt: Paying back benefit debt – what happens when deductions are made to benefit payments? from covidrealities.org