Benefit deductions should be stopped until inflation falls, say MPs

Ministers’ policy of clawing back hundreds of pounds a year from benefits has been criticised by MPs, who say it has tipped low-income families into destitution.

About 2.4 million households – nearly half of all claimants on universal credit – have on average £62 docked each month to repay benefit advances, tax credit overpayments and debts owed to landlords and utility companies.

With energy and food prices soaring and benefit levels pegged way below inflation, the deductions often leave struggling households without enough money to afford food or pay their bills, forcing some claimants to turn to food banks to survive.

The Commons cross-party work and pensions select committee urged ministers to give households extra “breathing space” by suspending all benefit deductions until inflation dropped to a manageable level or benefits were increased to accurately reflect living costs.

Stephen Timms, Labour chair of the committee, said: “Deductions by [the] DWP from benefits are contributing to the hardship, and the government should give those struggling some much-needed breathing space by following its own advice to other creditors and pausing repayments until the threat of inflation recedes.”

The committee noted that while the government has urged creditors to accept reduced monthly repayments from households battling the cost of living crisis, it “isn’t following its own advice” when it comes to deductions levied as a result of government policy rather than individuals’ behaviour.

The bulk of benefit deductions are for advance payments made to new universal credit claimants, introduced to help tide them over the built-in five-week wait for a first payment. They are interest-free but must be repaid from future benefit payments.

Although the committee broadly welcomed the government’s cost of living support package, it said the highest rate of inflation seen in the UK for 40 years – predicted to hit 11% in October – had exposed longstanding problems with the adequacy of the social security system.

The benefits uprating mechanism, which set benefit increases in April using inflation estimates from the previous September, had effectively caused a real-terms fall in income for low-income families and was “not fit for purpose”, the MPs’ report said.

Timms said: “A properly functioning social security safety net should be agile enough to respond to worsening economic conditions, but the high levels of inflation have laid bare the dysfunctional nature of parts of the system – not least that any increase in benefits is already seven months out of date when it takes effect.”

Ministers should review whether the standard levels of benefits, including disability benefits, are adequate, the report said. Cuts introduced from 2010 meant that UK social security spending would be about £34bn lower next year than it was in 2010, the committee noted.

It called for an urgent review of the benefit cap, which has been frozen at the same level since 2016, despite a statutory requirement to do so every five years. The committee noted that capped families did not even receive the 3.1% below-inflation benefits increase.

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A DWP spokesperson said: “We recognise people are worried about the impact of rising prices, that’s why we are providing £37bn of additional cost of living support. This includes £1,200 in direct payments for 8 million low-income households, most of whom received an initial £326 earlier this month.

“As part of our support package, we have also frozen energy deductions on universal credit, meaning any new request from energy suppliers for bills to be paid directly from benefits, or for an existing payment to rise, is denied unless the claimant also requests it.”

The Guardian