DWP update on ‘unfair’ benefit rules affecting thousands on Universal Credit after deductions found to be unlawful

THE Department for Work and Pensions has issued an update on a benefit rules that has been deemed unfair and unlawful.

A judge ruled that deducting unpaid rent from tenants’ Universal Credit payments automatically should not be allowed.

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Over 1.2million households, including 700,000 families with children currently have their payments reduced because of deductions[/caption]

The case was brought by Nathan Roberts, a law graduate, who found £500 missing from his Universal Credit after his landlord requested the Department for Work and Pensions (DWP) deduct rent and alleged arrears.

Money can be deducted from a person’s Universal Credit to help them meet any rent or debt repayments.

The amounts are subtracted from a claimant’s standard allowance each month until the debt is fully repaid.

However, Roberts was already in a dispute with his landlord over repairs, and had an agreed move-out date.

He argued that the DWP should have consulted him before taking any money.

Mr Justice Fordham, presiding over the case, deemed this process unfair and unlawful, highlighting the lack of tenant safeguards.

He pointed out that the DWP’s automated system allowed landlords to deduct up to 20% of a tenant’s standard allowance without any checks with the tenant.

For example, if a claimant’s standard allowance is £364.74 (as was the case with Nathan Roberts), the maximum deduction for rent arrears would be £72.95 per month

This meant the DWP only heard the landlord’s side of the story, the judge said, potentially disadvantaging tenants, especially those withholding rent due to disrepair issues.

The judge stressed that even if a tenant successfully appealed the deduction, they could face months on reduced benefits before getting their money back.

Emma Varley, an associate at Bindmans said: “The DWP will now need to change the way it makes deductions of this type by ensuring that all Universal Credit claimants are given the opportunity to make representations prior to deductions from their benefit being made to their landlord.”

A spokesperson for the DWP added: “We are now carefully considering this judgment.

“Millions of people rely on our welfare system every year and it is vital that it can be accessed by all who need it.”

This case echoes a previous successful legal challenge against the DWP’s practice of automatically deducting money from benefits to pay utility bills without consent.

A separate legal challenge which took effect in April 2022 also upheld that those on Universal Credit must be asked to agree to any new deductions for ongoing energy costs through the Fuel Direct scheme.

However, it fell short in forcing the Department for Work and Pensions (DWP) to ask for a claimant’s consent if they are in debt with their utility firm.

Claimants are fully entitled to contact the Department for Work and Pensions (DWP) at any time to stop any deductions.

The DWP said safeguards were in place to allow claimants to dispute deductions and ensure payments were “manageable” including the ability to submit an appeal, called a mandatory reconsideration.

It said people claiming Universal Credit were notified in advance, via their online account before third party deductions were applied, stating how to challenge them.

TYPES OF UNIVERSAL CREDIT DEDUCTIONS

There are a number of reasons why the Department for Work and Pensions (DWP) will deduct money from your Universal Credit allowance to help pay off any debts.

Conor Lawlor, benefits expert at Turn2us, says: “These debts can accrue in several ways, including for Universal Credit and other benefit overpayments (even if the overpayment was made in error by DWP), benefit advances and recovering hardship payments.

“The DWP can also deduct on behalf of third parties if a claimant is in debt to them, including for rent and service charge arrears, council tax arrears, court fines, child maintenance, and for utilities like electricity, gas and water.”

However, it’s important to note that not every deduction is compulsory, and some are voluntary.

CHANGES ON THE WAY

Rachel Reeves is set to lower the cap on the maximum level of deductions that can be taken from a claimant’s benefit payments from April.

Currently, the DWP and third parties can typically deduct up to 25% of a claimant’s standard allowance to manage their debt repayments.

However, the government will reduce this cap to 15%.

The measure, dubbed the Fair Repayment Rate, is expected to come into force in April.

The change is projected to benefit 1.2 million households, including 700,000 families with children, boosting their incomes by up to £420 a year.

However, some Universal Credit claimants still have more than 25% of their standard allowance taken off if they pay what’s known as a “last resort deduction”.

Whether the new cap will apply to those with such deductions remains unclear.