DWP could deduct up to 40% of benefits to settle rent arrears

The Department for Work and Pensions (DWP) could deduct money from benefit claimants’ payments if they owe money to their landlords.

In a committee meeting on the Public Authorities (Fraud, Error and Recovery Bill), Labour Minister Andrew Western reveals that up to 40% of benefits could be deducted to settle arrears owed to landlords, utility providers, or court-ordered debts.

It appears that the DWP would manage the repayment of arrears by deducting funds from claimants’ benefits, but it is unclear whether landlords would receive these payments directly.

Property118 has contacted the DWP to clarify this.

Direct deductions to no more than 40%

Andrew Western, Parliamentary Under-Secretary of State at the Department of Work and Pensions, explains how the process would work.

He says: “When making a direct deduction, a DWP official will assess the bank information and determine the most appropriate deduction.

“The schedule limits regular direct deductions to no more than 40% of the funds entering the account over the period in which the bank statements have been supplied. Regulations can lower, but not raise, the maximum percentage in some or all cases. That safeguards against excessive deductions and brings the powers in line with existing DWP recovery method legislation.”

Bank must comply with the information notice

Mr Western continues that a bank must give the information of the debtor, otherwise it could face a financial penalty.

He explains: “To determine whether to make a direct deduction order, the DWP can give a bank an account information notice or a general information notice. An account information notice must be given to a bank, prior to any direct deduction order, to obtain bank statements. It must contain the name of the debtor and identify the targeted account. It is a necessary and important safeguard so that the DWP can gather sufficient financial information to make informed decisions on fair and affordable debt recoveries.

“A general information notice can be issued at any time for the purpose of determining whether to make a direct deduction order. It requires the bank to provide information on all the bank accounts held by the debtor, including any joint or unincorporated business accounts.

“A bank must comply with an information notice, and may be liable to a penalty for failure to comply without a reasonable excuse.”

DWP must give debtor notice

Mr Western adds, before seeking to recover the debt, the DWP must give the debtor notice.

The debtor is then given at least one month to respond, after which the Secretary of State will review any representations and decide whether to uphold, modify, or revoke the order.

If no response is received, the order can proceed, but account holders still have another month to request a review.

According to a House of Commons research briefing in 2023, 45% of the 4.96 million households on Universal Credit had deductions, amounting to an average of £61.

The total amount deducted from UC awards was £137 million.

Update from the DWP

The Department of Work and Pensions has told Property118, the measures are for people no longer receiving benefits and not PAYE employment.

A DWP spokesperson said: “We are bringing forward the biggest fraud crackdown in a generation, saving the taxpayer £1.5 billion over the next five years, part of wider plans that will save £8.6 billion by 2030.

“The new debt recovery powers are underpinned by a principle of fairness and proportionality. The measures will be limited to those who are no longer in receipt of a benefit or enrolled in PAYE and are able to pay but repeatedly refuse to do so. Agreeing affordable and sustainable voluntary repayment plans will always be pursued first.”