In a move to support the UK’s most vulnerable households, the Department for Work and Pensions (DWP) is set to introduce a change to Universal Credit that will benefit over one million families. This announcement, expected in Wednesday’s budget, will see recipients receive an additional £420 annually on average.
The new measure, known as the Fair Repayment Rate, is set to come into effect next April. It will cap monthly deductions from Universal Credit payments at 15%, down from the current 25%, limiting the amount that can be deducted each month to repay short-term loans and debts, according to the Guardian.
A source from Whitehall described the initiative to the Guardian as “a downpayment on poverty reduction,” emphasising the importance of addressing deep poverty.
The change is anticipated to help approximately 1.2 million households, including around 700,000 families with children, who currently face significant deductions from their benefits.
These deductions often stem from various debts, including benefit advances and arrears for rent, council tax, and utilities.
The new policy will allow families to repay these debts over a longer period, alleviating some of the financial pressure they face.
Ruth Talbot, a policy advisor at Save the Children UK, praised the initiative, noting its potential to provide much-needed financial relief for families, allowing them to better afford essentials like food and clothing.
The charity estimates that single parents could see an increase of up to £39 in their monthly benefits, while two-parent families might gain up to £62.
However, while this measure is a positive step, experts caution that it may not be sufficient to significantly reduce reliance on food banks, as many households affected by Universal Credit deductions have been forced to go without essential items due to financial constraints.
Helen Barnard from the Trussell Trust said: “This would be a positive first step to tackling the appalling levels of hardship our community of food banks see every day. On its own, however, this is unlikely to significantly reduce the numbers of people forced to turn to food banks to survive.”
As the Government outlines its 10-year strategy to combat child poverty, there is growing concern about the increasing number of children living in relative poverty, with recent figures showing that one in three children in the UK were affected in 2022/23.
Campaigners warn that without decisive action, the gap between the richest and poorest households will continue to widen.
