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Benefit repayments add to hardship, study finds

15 January 2021

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THE Government must not put more pressure on families that are “barely keeping their heads above water”, the Bishop of Durham, the Rt Revd Paul Butler, has said.

Bishop Butler urged the Government to ease hardship for families by suspending Universal Credit repayments.

He told the Church Times last week: “Many low-income families are really struggling as a result of the pandemic due to loss of earnings and rising living costs, including many who have never been in this position before. The Government must not add to these pressures by pushing yet more debt on families who are barely keeping their heads above the water.

“That is why I support the immediate suspension of Universal Credit repayments, as well as a commitment to retain the £20 per week uplift to Universal Credit which will otherwise come to an end in April. As a nation, we must not forget those families who are bearing the brunt of this storm, by ensuring they get the support they need over the difficult months that lie ahead.”

The Child Poverty Action Group (CPAG) published a report on Thursday of last week, Advance to Debt: Paying back benefit debt — what happens when deductions are made to benefit payments?, written by a lecturer in social policy and social work at the University of York, Dr Ruth Patrick, and a senior policy analyst at the CPAG, Tom Lee.

They highlight how debt reductions to Universal Credit payments, including repayment of Universal Credit advances, legacy-benefit overpayments, budgeting loans, rent arrears, utilities bills, and mortgage interest, can significantly reduce the income received by households that are already classed as on a low income.

Last April, the Government initiated a three-month freeze of debt repayments for those on benefits as part of the emergency recovery package for the pandemic. They did not, however, suspend demands for repayments from those who needed benefits in advance to meet basic living costs.

In August 2019, the average loss of income owing to deductions, excluding repayments of Universal Credit that families might have received in advance, was £140 per month. In May 2020, the deduction for advance repayments on average was £60 per month.

For those who have had to pay back advance payments to Universal Credit, combined with other deductions, it can mean a loss of £179 per month.

In August 2020, 41 per cent of all households in receipt of Universal Credit — 1.85 million — were subject to debt-reduction payments, rising to 63 per cent when those claiming Universal Credit because of the pandemic were included. Families with children can be left up to £579 per month worse off as a result.

A cap on deductions of 25 per cent of the standard allowance has been introduced for October 2021. CPAG has said, however, that this does not go far enough, and that the waiting period is too long for many families.

The recommendations in the report include terminating the five-week wait for a first Universal Credit payment, converting advance payments into grants rather than loans, and writing off tax-credit overpayments after two years.

The research was produced as part of the Covid Realities project, which is based at the Universities of York and Birmingham and funded by the Nuffield Foundation. It looks at life for people on low incomes during the pandemic.

In a statement on Thursday of last week, Dr Patrick said: “When the pandemic struck, millions of families were forced on to Universal Credit and hoped for safe harbour there. In reality, they found a system that expects them to survive for five weeks without any payments, or, if they take an advance, to live on much less than their assessed need so that they can repay money they had no option but to ask for. The pandemic has exposed just how harsh and nonsensical this is.

“It has shone a light on the hardship faced by Universal Credit claimants — both those who were claiming before the pandemic, and those who had to claim because of it — many of whom are forced to struggle to get by on significantly less than what the Government’s own benefit calculations suggest that they need.

“The Government should respond to the many calls for reform, and make advances non-repayable. That would take Universal Credit a step closer to being fit for purpose, and offer some hope to the many families receiving UC who are going into a new year worrying about the new restrictions, school closures, and whether they can stay afloat financially.”

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