Millions on universal credit pay back £1 back in every £13 for overpayment mistakes

Half of people claiming universal credit (UC) - around 3.2 million - have money deducted from their payments to repay debts and correct HMRC errors according to new analysis.

The report from the New Economics Foundation (NEF) also found that the scale of automatic debt repayments administered by the Department for Work and Pensions (DWP) means that, across all families receiving universal credit, the basic payment is on average 8% lower than the official figure. This means every £1 in £13 paid through the basic rate is lost to debt deductions.

The analysis, based on parliamentary questions, also reveals that half of people currently receiving universal credit have money automatically deducted from their social security payments to repay debts. Each household with money deducted lost an average of £63 a month, amounting to a total of £1.3 billion lost from universal credit support in 2022/23.

The impact of these deductions varies across the country. In the worst-affected area, Blackpool South, two-thirds of families receiving universal credit have money deducted from their payments, reducing the average level of support for everyday costs like food and travel by 11.2%. This is almost double the proportion in the least-affected part of the country, South West Devon, where the level of support was 5.6% lower.

The DWP automatically deducts money from these universal credit payments when claimants are in debt, including to a private landlord, utility company, or the DWP itself.

This data mirrors our own, which shows that 30% of people we help who claim benefits seek debt support because they are unable to repay an overpayment. For 60% of them, benefit payments are their only source of income, greatly restricting their ability to repay the debt.

We support the New Economics Foundation in calling for the next government to make the household support fund permanent. And in lowering the maximum amount that the DWP can deduct from each universal credit payment from 25% to 15%.