UK Credit

DWP deductions leave households across Scotland paying £10million in ‘poverty tax’

Almost half of all Scottish households on Universal Credit are hit by a staggering £10m-a-month ‘poverty tax’ of DWP deductions from their benefits.

In a single month last year, 180,000 households in Scotland saw an average of £60 deducted from their social security payments, according to official figures.

The massive sum, from November 2021, was primarily intended to repay loans issued by the Department for Work and Pensions to cover the five-week waiting period at the start of a new UC claim.

SNP MP Chris Stephens, who discovered the figure in Parliamentary Questions, said the deductions amounted to £286,000 a month clawed back from claimants in his south-west Glasgow constituency.

In ten Scottish constituencies, more than half of claimants have their benefits clawed back to some degree, with average monthly deductions ranging from £57 to £62 per household.

Stephens, a member of the Commons DWP Select Committee, said: ‘It’s basically a poverty tax for people struggling to heat their homes and put food on the table.

Universal Credit is meant to be a subsistence benefit that covers basic living expenses. If £60 a month is taken away from him, while the cost of living is rising rapidly, how are people supposed to survive? »

He added: “Initial loans should be replaced with initial grants, the recovery of tax credit overpayments should be capped at a lower level and debts that have not been pursued for more than six years should be canceled entirely, in line with the approach taken in the private sector.

Most deductions, about 44%, are to refund UC prepayments made while claimants wait for their benefits to be processed and 17% are to refund historical tax credit overpayments.

Effective April 2021, the DWP reduced the normal maximum rate of Universal Credit deductions from 40% to 25% of a claimant’s standard allowance.

But Andrew Forsey, director of the charity Feeding Britain which runs the Threehills community supermarket in Glasgow, said that was not enough.

He added: “The DWP moved in the right direction last year by lowering the cap on deductions and doubling the length of time people had to repay those initial loans.

“But these figures show further action is needed – especially now that £20 a week has been cut from the Universal Credit base rate, along with the fact that base rate looks set to fall even further behind the cost of life in April.”

In his response to Stephens, DWP Minister David Rutley said the government was looking to “strike a balance between collecting debt and not causing hardship to claimants and their families”.

The Minister said: “Processes are in place to ensure that deductions are manageable, and clients can contact DWP Debt Management if they are experiencing financial difficulty, to discuss a reduction in their reimbursement rate or a temporary suspension, depending on their financial situation.”

He added: “Advances are a prepaid claimant’s entitlement to benefits, allowing claimants to access 100% of their estimated Universal Credit payment in advance, resulting in 25 payments over a period. of 24 months. It is not a debt.

The hardest hit areas of Scotland with deductions in a month were:

Constituency Total deducted in a month

East Glasgow £315,000

Kirkcaldy and Cowdenbeath £302,000

Glasgow North East £290,000

Glasgow South West £286,000

Dundee West £281,000

Glenrothes £276,000

Motherwell and Wishaw£272,000

Rutherglen and Hamilton West £271,000

Linlithgow and East Falkirk £267,000

Kilmarnock and Loudoun £262,000

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