Universal Credit deductions push vulnerable people further into poverty and debt

Universal Credit deductions leave people unable to afford food and other essentials.

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According to data published by the Lloyds Bank Foundation for England and Wales, deductions of up to 25 percent from Universal Credit payments leave more than 2 million people unable to afford basic necessities and push them deeper into debt.

The organisation urges an early review of Universal Credit deductions in order to assist the most disadvantaged individuals with growing living expenses.

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A little over a month after energy price hikes, national insurance increases, and rising food and fuel prices, the Lloyds Bank Foundation has released ‘Driver Of Poverty,’ a report including a combination of facts and research on how the current system of benefit deductions affects individuals.

The report highlights how Universal Credit (UC) deductions are confusing, unmanageable, and put individuals into financial difficulty for no apparent reason. It outlines the required adjustments to assist individuals in coping with rising prices and preventing further hardship.

DWP automatically deducts money from benefit payments to pay off debts owed to the government from loans, such as advance payments, errors, and previous benefit overpayments, as well as some third-party commitments (e.g. utilities bills and rent arrears).

Nearly half of those receiving UC had money automatically deducted, with an average monthly decrease of £78 – nearly 20 percent of the amount a single person over 25 would get, with many seeing far bigger reductions.

According to studies, UC recipients with deductions are roughly twice as likely to go without food, hygiene products, or utilities as UC recipients without deductions.

Claimants must wait five weeks before receiving UC payments, which requires them to obtain an advance to cover the cost of necessities. These advances must be repaid through deductions from their UC income, limiting their capacity to pay bills and expenses for months.

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In addition, millions of individuals who switch to UC realise that errors they committed years ago regarding the amount of tax credits they were due to must be refunded.

These government errors are deducted automatically, regardless of the individual’s ability to pay or the amount owing.

When other deductions such as council tax and other obligations are factored in, many individuals find themselves unable to pay for food or housing.

With inflation already at 8 percent and benefits increasing by just 3 percent this year, it is extremely difficult for individuals to make ends meet. Deductions significantly diminish people’s earnings.

According to data, more than half of those referred to a foodbank had their benefits reduced as a result of deductions, and the number is rising.

Paul Street, Chief Executive of Lloyds Bank Foundation for England and Wales, said: “At a time when the cost-of-living is soaring, the Government itself is making it harder for people by deducting significant sums from benefits, making it even harder for people to make ends meet.

“The deductions system is clunky and not fit for purpose, pushing people deeper into poverty through no fault of their own.

“Charities every day see people have significant sums deducted from their benefits that they don’t understand, without warning and that doesn’t take account of their circumstances, leaving them struggling to pay their bills however well they budget.”

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