Four things that we learnt from working alongside people with experience of being in debt to government – and how to fix the system

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“At the food bank – they’re absolutely brilliant, [but] they shouldn’t have to exist… government and organisations are relying on them too much, they pass the buck to volunteers.” – Tim

What is ‘government debt’?

As the nation faces a cost-of-living crisis and recovers from the devastating effects of the pandemic, new research shows people who cannot afford the essentials are being pushed deeper into poverty by a rising tide of government debt.

This debt can take many forms, including paying back Advance Payments given to people on Universal Credit to cover the five-week wait for their first benefit payment, paying back council tax debt to local authorities, repaying benefit overpayments, and more. Sometimes some of these are referred to as deductions from benefits, but here we are primarily calling them debt.

Nearly half of people referred to food banks in the Trussell Trust network are in debt to the DWP (Department for Work and Pensions – the department responsible for social security).

People who have experience of being in debt to government have been working closely with the Trussell Trust and Humankind Research, to develop ideas for what a fairer repayment system might look like.

Here are four key things we’ve learnt:

1. The design of the social security system sets people up to fail

“You provide all the correct information. They make the decisions. They make the cock-up. Then you’re penalised for it” – Alicia

The five-week wait for Universal Credit means many people have no choice but to take an Advance Payment – a loan made to support people until they receive their benefit payment, to manage essential bills like rent and utilities. That leaves people often starting out with deductions to their benefits, trapping them in impossible situations.

Similarly, when the benefit system makes overpayments in error – most commonly with tax credits – people found they are powerless as to when or how the money is clawed back. Participants found it particularly crushing to have their income slashed when they had so little choice in taking on these debts.


  2. Government debt can cause destitution

“It was feed the kids or pay the council tax, I obviously chose the kids.” – Lorraine, 38

High rates of debt to government among people referred to food banks in the Trussell Trust network, particularly the DWP, is no coincidence. Participants explained how too often government debt pushes them over the edge into not being able to afford essentials, with no route out. This was particularly damaging for people also dealing with underlying challenges such as mental health conditions, precarious work, and social isolation.


 3. The mental health impact of government debt cannot be underestimated

“[E]very day I feel like my mental health is being stripped a little bit more” – Samira, 28

Financial and emotional impact go hand in hand. Debt can trigger a downward spiral that becomes all-consuming and unmanageable. This was often made worse by the fact that it is the government – which many hope would be a trusted source of support – that is failing people so severely.


 4. The government is often seen to be a less responsible lender than the private sector

“With other debts you would have all of this [information] but with government debts you don’t get any of that. It has an impact not just financially but also on your mental health.” – David, 43

Many found they had better experiences with private lenders because they made it clearer how much was owed, and were flexible in considering how much people could afford to pay. In contrast, the rigidity in government debt collection and lack of information about ways in which to push for more affordable options, were a key source of stress, crisis and destitution.


So how can we fix this broken system?

The participants drew out some vital recommendations for the government:

  1. Government must tackle the design features in the social security system which create debt, such as the necessity of taking on Advance Payment debts to cover the five-week wait for Universal Credit.
  2. Government debt collection practices should embed the principles of clarity, flexibility and respect at their core – learning from best practice in the private sector.
  3. Wider efforts are needed to increase resilience and protect people from destitution, by urgently strengthening the social security system, uprating payments in line with the actual rate of inflation this spring – that is, by at least 6% rather than the planned 3.1%.
  4. We need policymaking with and alongside people with lived experience, harnessing the insight and expertise others do not have. Their voices must be heard if we are to transform our social security system to one which – at the very least – protects people from destitution.


Read the full report: Debt to Government, Deductions and Destitution.