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Roughly 50% of applicants for Universal Credit “Lose Money Through Automatic DWP Deductions.”

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According to recent research by the New Economics Foundation (NEF), half of those on universal credit are losing money on every payment because of automated deductions made by the Department for Work and Pensions (DWP).

Of their basic payment, claimants are losing £1 for every £13 in debt repayment to utilities and private renters, plus additional funds to make up for tax office errors. According to parliamentary inquiries, each household with deductions loses £63 on average each month, representing a total of £1.3 billion in lost benefits support in 2022–2023.

For the whole time they have received benefits, some claimants have faced deductions. Annie, a north-east England single mother of two, is unable to work owing to mental health concerns, so she receives disability benefits. Annie is a participant in the Changing Realities project, which documents the hardships faced by low-income families and is funded by the universities of York and Salford. Her benefits are £660 a month, of which £66 is taken out to pay back a budgeting loan she received from the Department for Work and Pensions (DWP) for school and vacation expenditures.

Annie stated that these deductions have a significant negative influence on her capacity to meet her children’s extracurricular activities or the food budget: “That’s an extra £66.” Fruit and meat are luxury items at the moment. The kids need to eat, so I am missing meals left and right. My kids need new school shoes, thus I have holes in mine.

The amount withheld varies from state to state. Almost twice as many households in Blackpool South—the least impacted constituency—as those in South West Devon—have deductions from their universal credit payments.

According to NEF, these deductions put households in a debt cycle that deteriorates their physical and emotional well-being. “Cuts to already meagre levels of universal credit have made it harder for people to afford the basics like food on the table and a warm home,” said Sam Tims, a senior economist at NEF. It’s more likely that they’ll have to take time off work due to the physical and mental strain this causes. The next administration must ensure that social security pays for people’s necessities and that the pursuit of debt doesn’t compromise this guarantee if we want an economy where everyone can prosper.

Deductions are limited to 25% and are only utilized as a last option to assist claimants in paying off debt, the Department for Work and Pensions (DWP) said.

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