Support 100 years of independent journalism.

  1. Politics
  2. Welfare
1 December 2020updated 25 Jul 2021 11:42am

DWP debt drives people to food banks – exposing the Orwellian nature of Universal Credit

Food bank users are now more likely to be in debt to the government than to loan companies or family and friends.

By Anoosh Chakelian

Over seven years, I have reported on the difficulties some people experience when using the Universal Credit welfare system: payment delays and faults leaving young people and single mothers in the lurch, even facing eviction and homelessness; the flawed algorithm landing claimants in a month without pay; its five-week wait pushing people into poverty.

The caveat, emphasised by both Department for Work and Pensions (DWP) press officers and myself, keen not to panic readers, was always that if you needed it, you could receive emergency funds upfront while you waited for your first payment.

This is what’s known in benefits speak as an “advance payment”. But it’s not a payment at all. It’s a euphemism for loan. You can apply for one when you first claim Universal Credit if you can prove you need upfront financial help while you wait for your initial payment.

You then pay it back via deductions of up to 30 per cent from your monthly Universal Credit standard allowance – and you have to pay it all back within 12 months. There is no interest on the repayments.

[See also: The A to Z of Universal Credit]

Sign up for The New Statesman’s newsletters Tick the boxes of the newsletters you would like to receive. Quick and essential guide to domestic and global politics from the New Statesman's politics team. The New Statesman’s global affairs newsletter, every Monday and Friday. The best of the New Statesman, delivered to your inbox every weekday morning. A handy, three-minute glance at the week ahead in companies, markets, regulation and investment, landing in your inbox every Monday morning. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. A weekly round-up of some of the best articles featured in the most recent issue of the New Statesman, sent each Saturday. A weekly dig into the New Statesman’s archive of over 100 years of stellar and influential journalism, sent each Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy

To me, it seemed the language of “advance payments” was a rhetorical device used to suggest no one would be left with nothing when first claiming Universal Credit. But the reality is that these loans simply delay hardship, and can push those already in a financially vulnerable situation into debt. Indeed, Citizens Advice has warned in the past that such debt could lead people to riskier sources of borrowing, such as loan sharks.

According to new research by the Trussell Trust, almost half of food bank users (47 per cent) in Britain during June and July owed money to the DWP due to loans and benefit overpayments – compared with 37 per cent before the pandemic hit.

Almost three in four (73 per cent) households on Universal Credit using food banks over these summer months this year were repaying an “advance payment” to the government.

Content from our partners
Helping children be safer, smarter, happier internet explorers
Power to the people
How to power the electric vehicle revolution

In early 2020, before the first Covid-19 lockdown, food bank users in debt more often owed their family or a friend, at 48 per cent, over the government or private lenders such as payday loan or credit card companies. In mid-2020, this pattern shifted, and now food bank users are most likely to be in debt to the DWP, at 47 per cent, over loved ones or private lenders.

[See also: Poverty by algorithm: The Universal Credit design flaw that leaves people penniless]

“Our welfare system should increase people’s security, not suffering. But right now, the government is taking money from the benefit payments of many people using food banks,” said Emma Revie, the chief executive of the Trussell Trust, who is calling for a pause in repayments over the winter months.

“Taking money off payments to repay these debts makes it much harder for people to afford the essentials.”

This is yet another topsy-turvy feature of the so-called safety net, which already makes suddenly hard-up or jobless people wait five weeks for their first payment. As the pandemic exposes the flaws of Universal Credit to more people – and to new demographics – it will become harder to hide behind the language that disguises loans as early payments.

[See also: “I’ve never relied on anyone in my life”: Covid-19 and the new Universal Credit claimants]