Taking too much? The experience of benefit deductions to pay for energy and other debts
Energy customers are going through an incredibly challenging time. The Covid-19 pandemic has left many people worse off and the number of people on Universal Credit has tripled since March 2019, to almost 6 million in July 2021. More recently, the £20 a week Universal Credit uplift has also ended and the energy price cap has increased by around £140. We’re concerned that in these circumstances many more households may fall behind on their energy bills.
If they do fall into debt, one way people on Universal Credit can manage their repayments is through third party deductions. This means that if someone is in debt to their energy supplier, the Department for Work and Pensions (DWP) takes money directly from their benefit payment and gives it to the energy supplier. People using deductions pay a fixed amount each week to cover their debt and a further amount to cover their ongoing energy usage.
We carried out research with energy suppliers and qualitative interviews with people using the deductions scheme to pay for energy debt. Through this research, we found that while the people we spoke to were generally positive about the scheme, there were some key pain points in the process:
- People feel worse about deductions if they feel they didn’t provide consent.
- Keeping track of the payments can be challenging and people aren’t sure who to go to if they’re struggling to manage.
- When people pay off their debt there can be a lack of support to help them stay out of debt in future.
It’s vital that the process works as well as possible and ultimately supports people out of debt. Some key changes we recommend in this report are:
- Repayments that are based on a person’s ability to pay
- Clearer guidance on the scheme
- More support to help people get back on track after they finish paying their debt