More than a quarter of the two million people claiming Universal Credit are having deductions taken from their monthly payments to cover tax credit overpayments.
Benefits payments have been slashed for 570,000 people who have moved on to the controversial system with an average debt of £610 while some are facing debts up to £1,560, according to government figures.
In order to recoup overpayment of the income-based credits, benefits chiefs can take away 15 per cent of payments or 25 per cent for people in work, amounting to around £47.67 for a single person over 25.
Half of the people we help while waiting for their initial payment are unable to keep up with bills or rent – so any deductions can push people over the edge
That was the reality for one in five claimants last month with 410,000 losing cash, which will continue until the debt is repaid. And claimants often only find out about the debt when they apply for Universal Credit.
Gillian Guy, chief executive of Citizens Advice, has warned the government that the debt collection could leave people living on an unsustainable amount.
“Deductions can be made to repay previous overpayment debts, but these can be from years ago and often come as a surprise,” she said. “They can also come on top of other deductions leaving some people unable to cover their essential costs.
“Our evidence shows that many people on Universal Credit are already struggling. Half of the people we help while waiting for their initial payment are unable to keep up with bills or rent – so any deductions can push people over the edge.”
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The Department of Work and Pensions (DWP) has previously found that the debt came as a surprise to three-quarters of claimants with tax credit overpayments, who discovered that they had to pay back cash only when they claimed Universal Credit.
A third of those were experiencing financial difficulties, according to the survey, with more than half of that group reporting that their struggles came as they began claiming Universal Credit.
570,000 people on #UniversalCredit are repaying Tax Credit overpayments. This can come on top of money deducted for other debts, making it harder for people to pay for essentials. Government must ensure debt collection under UC is affordable for claimants. https://t.co/AMLJPnEJCa
— Minesh Patel (@minesh1112) May 31, 2019
Shadow Work and Pensions Secretary Margaret Greenwood has warned that repayment can “push people into severe hardship” but the government has stressed that safeguards are in place.
A government spokesperson said: “Where an overpayment of Tax Credits is identified, we work to resolve the matter with the customer as quickly as possible.
“Safeguards are in place to ensure repayments are affordable and we have recently announced we will reduce the maximum amount that can be deducted from someone’s Universal Credit claim.”