Universal Credit recipients unfairly paying £111m a year due to government mistakes, warns Citizens Advice

Citizens Advice is calling for Universal Credit to be urgently reformed, as its latest report lays bare the harm caused by the current system, in particular deductions.

Key findings from the report include:

  • More than two million households on Universal Credit – including 2.3 million children – are receiving less income than they are entitled to because of deductions

  • Universal Credit recipients are paying £568m a year because of overpayment deductions, including unfairly paying £111m due to government errors

  • Citizens Advice has recorded a 28% increase in the number of people asking for help with deductions since 2019 

Benefit deductions are amounts taken off people’s benefit payments in order to repay debts. The majority are for debts owed to the government, such as advance loans or historic overpayments. 

Deductions, by their nature, reduce people’s income below their assessed need - 45% of Universal Credit claimants have money taken off their award, with £61 being the average monthly deduction.  

Universal Credit recipients can see their benefit reduced with little explanation from the Department of Work and Pensions (DWP) as to why, especially in the case of historic overpayments. Overpayments happen when someone receives more money in benefits than they should, so the government reclaims the extra through a deduction. 

Research by Citizens Advice has shown 643,000 Universal Credit claimants see their benefit income reduced because of tax credit deductions, while 481,000 experience DWP overpayment deductions - with those impacted losing an average of £500 a year. People often aren't aware of any historic overpayments and only find out when they see their benefit payment reduced.

For those with DWP overpayment debts, almost half (47%) of the amount being overpaid is down to government errors, rather than claimants’ mistakes. Citizens Advice has found these errors mean Universal Credit recipients are unfairly penalised to the tune of £111m a year. 

What we think should happen:

1. The DWP should stop claiming back overpayments due to government error

2. It should write off all overpayments which occurred more than five years ago

3. Government communications should be improved to empower claimants to challenge DWP decisions

Dame Clare Moriarty, Chief Executive of Citizens Advice, said:

"Too many people on Universal Credit are being penalised for the government's mistakes. Errors which are actively causing harm, are pushing households, including those with children, into debt and forcing them to choose between heating and eating. 

“If the government is serious about improving living standards and reducing child poverty it must urgently reform Universal Credit. There are cost-effective ways of doing this now which could help protect millions of people from destitution.

“Writing off overpayment debts due to government error would be a good place to start, but a broader rehaul of the system is needed in the long term to prevent harm.“

 -ends-

Notes to editors:

  1. “Universal Credit recipients unfairly lose £111m a year due to government mistakes”. This estimate is based on DWP data on average monthly deductions related to DWP benefit overpayments, and the balance between overall non-fraud overpayment value for either official or claimant error for Universal Credit, as reported in DWP's annual reports.

  2. Universal Credit recipients are paying £568m a year in overpayment deductions, this breaks down as: £331,788,000 in tax credit overpayments and £236,652,000 in DWP benefit award overpayments, based on February 2023 DWP data on average monthly deductions and households with each deduction type.

  3. Citizens Advice has found 643,000 Universal Credit claimants see their benefit income reduced because of tax credit deductions, while 481,000 experience DWP overpayment deductions, based on a monthly snapshot of DWP data from February 2023.

  4. Citizens Advice is made up of the national charity Citizens Advice; the network of independent local Citizens Advice charities across England and Wales; the Citizens Advice consumer service; and the Witness Service.

  5. Our network of charities offers impartial advice online, over the phone, and in person, for free. 

  6. Citizens Advice helped 2.66 million people face to face, over the phone, by email and webchat in 2022-23. And we had 60.6 million visits to our website. For full service statistics see our monthly publication Advice trends.

  7. Citizens Advice service staff are supported by more than 16,000 trained volunteers, working at over 1,600 service outlets across England and Wales.

  8. You can get consumer advice from the Citizens Advice consumer service on 0808 223 1133 or 0808 223 1144 for Welsh language speakers.