Thousands of people on Universal Credit (UC) – who are already struggling on low incomes – face having their entitlements slashed because of the government’s own errors.
The Department of Work and Pensions (DWP) can automatically claw back money from families after the department mistakenly makes an overpayment or if it seeks repayment for third-party debts such as rent or council tax arrears.
In January alone, 6 per cent of claimants – more than 40,000 people – had their payments reduced by 40 per cent, according to new figures obtained by Labour. In the 18 months to October 2017, nearly 100,000 people had their UC payments clawed back because of debts on tax credits.
In 2016-17, £90m worth of UC payments were overpaid, with a third of overpayments by the DWP, local authorities or revenue and customs in the last two tax years made because of official error.
Under the previous benefits system, households were protected by a cap on the amount that can be deducted from their payments at 25 per cent. But now under UC – a system that rolls six benefits into one and is slowly replacing the previous benefits system – there are no standard caps, leaving families at the mercy of DWP deductions.
Labour MP Ruth George warned that the deductions will only further push families already struggling with debt deeper into it. After all, many claimants went into debt in the first place because of delays to their first UC payments.
Most people won’t receive their first payment until five to six weeks after they apply, with many more being forced to wait longer. While claimants can ask for an advance payment, this too, is another DWP debt that can be forcibly clawed back later.
“Support under Universal Credit is already below poverty levels for many groups, especially lone parents and disabled people,” George said.
“It is almost impossible to repay a loan when your income is so low, and the high cost of credit for people on low incomes creates a vicious circle of debt.”
The latest UC expose from Labour comes as more and more evidence mounts over Universal Credit’s failures.
Late last year, the Huffington Post revealed that people claiming Universal Credit with terminal illnesses such as dementia, cancer and motor neurone disease, who are unable to work, are still being forced to attend meetings with ‘work coaches’.
Under the previous benefits system, a dedicated team helped those who are terminally ill, but under the new UC system, no such team exists.
In December last year, UNITElive told the story of Sarah, who will be better off without a job under Universal Credit than if she keeps running her successful childminding business of several decades. A new analysis out last month shows that Sarah is far from being alone – in fact, 78 per cent of low-income self-employed people in London will be more than £4,000 a year worse off under Universal Credit.
The think tank Policy in Practice analysed 19 London boroughs and found – because of the way that Universal Credit calculates self-employed people’s income using a ‘minimum income floor’ – more than three-fourths of self-employed UC claimants will lose £344 each month.
Universal Credit has also meant a change in eligibility for children’s free school meals – and while more children in total will be eligible for the meals under UC, 1 in 8 of the 1.3m children who were eligible under the old system will see their meals being taken away, according to a new analysis out last week.
“Just like their freeze on social security as a whole, this is a conscious choice by the Tories to withdraw support from the children and families who need it most,” said shadow education secretary Angela Rayner, commenting on the findings.
Unite has argued that problems with the new benefits system go well beyond merely a botched roll-out – instead of calls to fix Universal Credit, the union is calling for the system to be stopped altogether.
On Thursday, May 24, Unite will be organising a nationwide demo calling on the government to reverse benefits reforms that have seen hundreds of thousands of families fall through the cracks.
Unite Community national co-ordinator Liane Groves encouraged all to attend.
“It becomes clearer each and every day – as households sign on to Universal Credit – that the government’s reforms are not only ill-thought through but are downright cruel.
“It cannot be right that up to 100,000 children will have their free school meals taken away; that those families already struggling with debt will be pushed further into it only because of official error; or that self-employed people will lose thousands of pounds each year, forcing them to give up their businesses.
“On top of reducing waiting times for Universal Credit claims that are pushing families into poverty and debt, the government must abandon in-work conditionality for part-time and low paid Universal Credit claimants and increase its overall funding levels. It must make sure that no family loses out under the new system. If this government really wants – as it so often says – to ‘make work pay’, then it can start by supporting those who need it most instead of kicking them while they’re down.”