Reducing deductions: the first step in a package of support for low-income households

Post date: 
17 May 2022

New data released today shows that 4.1 million households were claiming universal credit (UC) in February 2022. Benefits were recently increased by less than half the rate of inflation, meaning these families saw the real value of their UC fall by £660 a year on average. And while benefit levels sit at historic lows, an estimated 1.8 million households are receiving an average of £61 less each month than they are entitled to because of automatic deductions from their UC payment.

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Two in five (42 per cent) families receiving UC have money automatically taken from their UC each month, affecting an estimated 2 million children in lower-income households. These deductions are most commonly to repay loans families were forced to take out to get them through the initial five-week wait for their first UC payment.

With so many households on the edge, every pound deducted from UC is a pound less for food, electricity and other essentials. Families across the country are cutting back on non-essential spending as prices rise at the fastest rate in three decades, but many families receiving benefits simply have nothing left to cut back. Deductions make a difficult situation worse, and were a key driver of food bank use even before the cost of living crisis hit.

The government must take immediate action to reduce the burden of deductions on cash-strapped families. Lowering the maximum deduction rate from 25 per cent of the UC ‘standard allowance’ to 15 per cent would provide up to £53 more a month for a couple and up to £33 more a month for a lone parent.