DWP to scrap ‘unfair’ benefit scheme that left thousands of renters short of cash

The Department of Work and Pensions (DWP) will scrap an “unfair” benefit scheme that left thousands of renters short of cash.

Ministers have confirmed a computer programme that automatically approves landlords requests to deduct hundreds of pounds from their lodgers benefits will be stopped.

PA:Press Association

The DWP has said it will look for ways to replace the system[/caption]

Last month, a judge ruled the process, which is used by the DWP to process requests from landlords, was unlawful.

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 taken from a claimant’s standard allowance each month until the debt is fully paid back.

However, Roberts was already in a dispute with his landlord over repairs, and had an agreed a date he would move out of the property.

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

At the time Mr Justice Fordham, presiding over the case, deemed this process unfair and unlawful.

He said that 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, and could potentially leave tenants at a disadvantage.

This could especially be the case if someone is withholding rent due to disrepair issues.

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

Now, the DWP has said it will not appeal the judges ruling and look for ways to replace the automated system.

Work and Pensions Secretary, Rt Hon Liz Kendall MP, said she was “determined to right the wrongs that have persisted in the benefits system for too long.”

She said: “The automatic approval of landlords’ requests for tenants’ benefits to be deducted is one of these.

“As well as urgently reviewing this system, I am bringing forward major changes to the health and disability benefits system so that it works for everyone, underpinned by the biggest employment reforms in a generation.”

She added: We will continue to listen to people’s concerns, and transform our benefits system to one of fairness, not punishment.”

Roberts 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.

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.

If you claim benefits you are entitled to contact the Department for Work and Pensions (DWP) at any time to stop any deductions.

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.