IMMEDIATE RELEASE

Government treatment of over 1 million people who have been overpaid benefits is “reminiscent of carers’ allowance scandal”, warns Martin Lewis’s charity

17 July 2025

• New research by Martin Lewis’ charity the Money and Mental Health Policy Institute exposes the harsh way that the government treats people who have been overpaid benefits — showing that it is more aggressive and rapid than banks in collecting debt, and that people with severe mental illness are disproportionately affected. 
• This process is comparable to the carers’ allowance scandal, which saw many carers being inadvertently overpaid carers’ allowance, before facing aggressive and punitive debt collection from the government.
• Money and Mental Health is calling on the government to urgently reform its approach to collecting benefits overpayments, ahead of it gaining more debt collection powers via the Public Authorities (Fraud, Error and Recovery) Bill currently going through Parliament.

Benefits overpayments occur when the Department of Work and Pensions (DWP) pays more in benefits than someone is entitled to — most often in Universal Credit — either due to DWP error, or changes in a person’s circumstances. Money and Mental Health’s research shows that 1.1 million people across the UK owe the DWP money that they have been overpaid in benefits (1). 

This group is being subjected to sudden and severe debt collection practices by the government, which is causing serious needless financial hardship and distress for people in vulnerable circumstances. The report shines a light on how the Government’s own process compares to what’s required from consumer creditors like banks:

• The DWP can directly deduct 15% of your monthly Universal Credit payment if you have been overpaid benefits, and in many cases this happens within a month of the DWP spotting the overpayment. That means that overpayments can accumulate for months unbeknown to recipients, but the DWP will rapidly take payment within weeks of identifying an issue.
• For a single adult aged 25 and over, 15% of your monthly Universal Credit payment can amount to £60 a month — causing a significant income shock for people who have a low income and are struggling to make ends meet. 
• In contrast, commercial lenders cannot forcibly take money from your income without having first secured a court order, a process that typically takes between 6-12 months. 
• The DWP also gives very little warning that it is going to take a payment from you, and barely any chance to negotiate an affordable payment plan. You are sent an alarming letter and message on your online Universal Credit (UC) account, saying:

          You have been paid more Universal Credit than you are entitled to. This will now be taken back.

• In stark contrast, consumer creditors such as banks, credit card companies, water companies and energy companies are required by regulation to engage extensively with people who owe money. These processes are not perfect, but offer more opportunity for people to engage with and resolve their debt. 
• While you can call the government to try to negotiate an affordable plan, the DWP does not clearly explain this to people in its message. Even if you do manage to call the DWP and to negotiate a plan — an extremely difficult task for people struggling with mental health problems or other challenges — the DWP always takes a first payment of 15% of your monthly UC payment before implementing the repayment plan you’ve agreed – even if it now knows that you can’t afford it.  
• In contrast, commercial creditors will usually proactively offer you an opportunity to agree to an affordable repayment plan.

Today’s new research shows that this harsh and rapid process disproportionately affects people with severe mental health conditions such as schizophrenia and bipolar disorder, who are eight times more likely to have been overpaid benefits (2).

It is resulting in serious financial and psychological harm for many people already struggling with money and mental health problems. In an in-depth survey of 185 people with mental health problems undertaken by Money and Mental Health (3), respondents described how this process left them facing sudden income shocks, struggling to put food on the table and experiencing serious distress. One research participant said:

“Having money deducted from my benefits has made it difficult for me to make ends meet and some days I have been not eating because I can’t afford to, which is leaving my mental health in tatters.” 

Money and Mental Health is calling on the government to urgently change its processes for collecting benefits overpayments, ahead of the DWP gaining more powers via the Public Authorities (Fraud, Error and Recovery) Bill currently passing through Parliament. Its new powers will include the ability to make direct deductions from the bank accounts of people who are no longer on benefits or in PAYE employment, without having secured a court order.

In particular, the DWP should proactively assess how much people can afford to repay. For example, the DWP could mirror the approach taken by consumer creditors in assessing someone’s income and essential outgoings, and then giving people a real chance to negotiate an affordable repayment plan — instead of automatically taking 15% of their UC payments. 

The charity is also calling on the Government Debt Management Function — the body responsible for debt management standards across departments including the DWP and HMRC — to strengthen and enforce its guidance for all government departments on how to protect people in vulnerable circumstances from harm, including people with mental health problems. 

Commenting on the findings, Helen Undy, Chief Executive of the Money and Mental Health Policy Institute, said:

“The government’s harsh treatment of people who’ve been overpaid benefits is reminiscent of the carers’ allowance scandal. When people are paid more in Universal Credit than they are entitled to, it’s often through no fault of their own, and sometimes the first they know of it is when the government takes sudden and brutal steps to claw those payments back. Many people we work with are already running out of money for food before the end of the month, suddenly taking £60 from what they have left plunges them into further financial hardship and needless distress. 

“The government has pledged to overhaul how it reclaims carers’ allowance, now it needs to do the same for how it collects Universal Credit overpayments. Above all, that means proactively giving people a real chance to negotiate a payment plan that they can actually afford, instead of just taking money out of people’s income with barely any warning.”

“We’d also like to see better standards applied across all government debt collection. It cannot be right that the state is lagging far behind the standards that consumer creditors have to meet in treating people fairly and with respect if they fall behind on payments.”

ENDS

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