The Government recognises the importance of safeguarding the welfare of claimants who have incurred debt. Under Universal Credit there is a structured approach to deductions from benefit, which simplifies the current complex arrangements. Claimants can view their Universal credit statement online and easily understand both how their award is calculated and what debts are being repaid, supporting them to manage their financial obligations.
The aim of the deductions policy in Universal Credit is to protect vulnerable claimants by providing a last resort repayment method for arrears of essential services. The policy also enables social obligations to be enforced when other repayment methods have failed, or are not cost effective, and ensures that benefit debt is recovered in a cost effective manner.
Regulations protect claimants from excessive deductions, which could lead to financial difficulty.
Universal Credit is made up of a standard allowance plus any additional elements that apply, for example a housing element or child element. The overall maximum amount that can be deducted for debt repayments from a claimant’s Universal Credit each month is an amount equal to 40 per cent of their Universal Credit standard allowance.
Where requested deductions exceed the 40 per cent maximum, or there is insufficient Universal Credit in payment for all deductions to be made, a priority order is applied, which determines the order in which items should be deducted. ‘Last resort’ deductions, such as rent or fuel costs, are at the top of the priority order, ensuring that claimant welfare is prioritised, followed by social obligation deductions, such as fines and child maintenance, and finally benefit debt, such as Social Fund loans and benefit overpayments.
There are two exceptions to the overall maximum deduction rate. The first is deductions for current consumption of gas, electricity and water, which do not count towards the overall maximum amount. The second is where a Conditionality Sanction or Fraud Penalty is being applied or an Advance is being recovered, ‘last resort deductions’ (that is arrears of rent, service charges, gas or electricity) continue to be taken, even if it means that more than 40 per cent is deducted. This is to protect vulnerable claimants from being made homeless or having their fuel disconnected.
The Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013(S.I, 2013/380) and specifically Regulation 60 and Schedule 6, paragraph 4 explains how claimants are protected from excessive deductions. These regulations are available at http://www.legislation.gov.uk/uksi/2013/380/contents/made.