New Year call for an end to clawback of UC advances
More than one million households forced to claim universal credit (UC) when coronavirus struck are entering the New Year having debt deductions taken from their UC, and almost all include repayments of an advance taken out to get them through the five-week wait for a first UC payment, new analysis for the Covid Realities research project shows.
Nearly two thirds (63%) of those who claimed UC between March and June (‘Covid-claimants’) are having deductions taken from their monthly UC payments, compared with 41% of all UC claimants, the analysis by Child Poverty Action Group for the Covid Realities research project shows. That means a million new UC claimants living on less than their assessed need.
The Government suspended some deductions for three months from April 2020 as part of its emergency response to the pandemic. However, deductions for the repayment of UC advances were not part of the suspension and continue to be made as another lockdown begins in England and Scotland and more job losses and UC claims look likely.
Deductions can be taken from benefits for a range of reasons including repayment of a UC advance, legacy benefit overpayments, budgeting loans, rent arrears, utilities bills and mortgage interest. For UC claimants, deductions are limited to 30% of the UC monthly standard allowance but this still means that £179 (for couples) can be deducted each month.
For claimants already living below the poverty line, deductions can deepen their poverty significantly. Ignoring deductions, CPAG analysis shows that, the average household in poverty is 23% below the poverty line; in pounds and pence, for a couple with two children, that means they are £400 per month below the after housing costs poverty line.* However, if this family has to repay an advance, this will push them to £500 per month below the poverty line.** And if they have additional deductions on top of repayments of a UC advance, they could drop to £579 per month under the poverty line.***
1,060,000 ‘Covid claimants’ have a deduction of some kind from their UC. Of those, 810,000 are repaying an advance only, 50,000 have a deduction for another reason and 200,000 have deductions to repay a UC advance and another debt.****
Dr Ruth Patrick, Lecturer in Social Policy and Social Work, who leads Covid Realities and co-authored the report 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 UC 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 they need. The Government should respond to the many calls for reform and make advances non-repayable. That would take UC 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.”
The Covid Realities project is funded by the Nuffield Foundation. One participant in the project, Aurora, a mother of two claiming universal credit, says:
"It's impossible to cope on what's left over when debt deductions are taken out. It's time to fix this; and provide much-needed help to families and their children.'
As well as ending the five-week wait for universal credit, the report calls on the government to write off historical tax credit overpayments from more than two years ago – when people’s circumstances may have been very different. Having these payments hanging over them, as well as having to pay new UC advances, sets people up to fail at a time when they urgently need an adequate level of financial support through the social security system.
Official figures show average deductions for the repayment of UC advances is £60 per month– although this is likely to be larger for families, and 80% of UC advances are taken out by claimants to help them cope with the five-week wait for a first UC payment.*****
1.85 million of all UC claimants (rather than only those who claimed because of coronavirus) are having deductions from their benefits, 87% of which included repayments of a UC advance. Fifteen per cent of all UC claimants have deductions for a debt other than a UC advance.******
CPAG’s analysis shows these deductions average £140 per month.*******
Notes to editors:
An embargoed copy of the report is here
Parents taking part in the Covid Realities project may be available for interview through CPAG’s press office on 07816 909302.
UC advances are upfront payments made to UC claimants at the start of a claim. Deductions for repayments of advances are taken from monthly UC payments over a year. From October 2021 the maximum monthly deduction will be reduced to 25% and the length of time to pay back will be increased to 24 months. This change will slightly improve the financial hardship faced by families in any given month. However, £150 a month can still be deducted (from couples) and households will face these deductions for a longer period of time. In addition, October 2021 is a long way off for households currently facing deductions who are particularly struggling now because of the labour market impact of COVID.
A technical appendix to the Advance to Debt! report is available on request.
* Estimated using UKMOD, Family Resource Survey and Understanding Society – COVID module
** Author’s calculations using Proportion of Universal Credit claims with deductions, average deduction and proportion of the total amount deducted to repay advances for claims with a payment due in May 2020, by Parliamentary Consituency, GB.
The average UC advance repayment deduction is £60. However, advance repayments for new claimants (to cover the five week wait) are based on expected entitlement. Families have higher costs and therefore higher entitlement through the child element and increased housing element, meaning we would expect an average couple with 2 children to be repaying £100 a month
*** CPAG calculation from Number of households on Universal Credit, Stat-Xplore, Department for Work and Pensions; https://www.theyworkforyou.com/wrans/?id=2020-11-09.113275.h&s=universal...
**** Stat-Xplore, Department for Work and Pensions; Universal credit declarations (claims) and advances: management information; https://www.theyworkforyou.com/wrans/?id=2020-11-09.113275.h&s=universal...
***** Universal credit declarations (claims) and advances: management information, Department for Work and Pensions
******* Author’s calculations from Number of households on Universal Credit, Stat-Xplore, Department for Work and Pensions; https://www.theyworkforyou.com/wrans/?id=2020-11-09.113275.h&s=universal... https://www.theyworkforyou.com/wrans/?id=2020-01-31.10759.h&s=deductions...
Poverty figures quoted in this release are for relative poverty, measured as living on less than 60% of today’s median income, adjusted for family size, after housing costs.
Covid Realities is a research project based at the universities of York and Birmingham, working in partnership with Child Poverty Action Group. It works with parents and carers to understand the challenges faced by families living on a low income during the pandemic, and aims to help policymakers make better-informed decisions. Parents can log onto a safe, online space, where they complete diary entries; respond to ‘big questions of the week’; and also take part in virtual discussion groups. The project is funded by the Nuffield Foundation.
The Nuffield Foundation is an independent charitable trust with a mission to advance social well-being. It funds research that informs social policy, primarily in Education, Welfare, and Justice. It also funds student programmes that provide opportunities for young people to develop skills in quantitative and scientific methods. The Nuffield Foundation is the founder and co-funder of the Nuffield Council on Bioethics and the Ada Lovelace Institute. The Foundation has funded this project, but the views expressed are those of the authors and not necessarily the Foundation. Visit www.nuffieldfoundation.org