Two-thirds of benefits claimants with debts have been unable to buy food, according to a damning official report that Labour says was suppressed by the previous government.
The report by the Department for Work and Pensions said some people had been driven into debt because they had not been able to access benefits, and 81% of universal credit claimants in debt ran out of money before their next payment “always” or “most of the time”.
It also found that UC claimants with debts were less likely to be able to find work or a better paid job because they could not afford to travel. Some feared being locked forever in financial instability.
One in five owed at least £10,000.
The report is one of 31 documents that Liz Kendall, the work and pensions secretary, ordered to be published last week, telling MPs they had been “sat on by the previous government”.
Some of the reports date back to 2018 and none of the four work and pensions secretaries during that period – Amber Rudd, Thérèse Coffey, Chloe Smith and Mel Stride – chose to publish them.
When he was chair of the work and pensions select committee, Stephen Timms, now social security minister, confronted Coffey over her decision not to publish some of the reports.
Kendall said the government would “always be open and honest” about challenges it faced.
“This is a new era for DWP and we are determined to be open and transparent,” she told the Observer. “The public should know what their money is being spent on, and how policies are created.”
Whitehall insiders say it is not clear why many of the reports were not released, since they were politically uncontroversial. Yet some offered a challenge to the policy of the Sunak, Truss and Johnson governments that focused on benefit crackdowns and the introduction of UC.
Claimants wait at least five weeks for their first payment and often need an advance which must be repaid, reducing their income. Charities say the £393.45 monthly payment for an adult over 25 is not enough to survive.
One of the reports, Impacts of external debt for indebted Universal Credit claimants, was based on a survey of 3,899 claimants who had borrowed with credit cards, personal loans, or from payday lenders, family and friends or loan sharks.
It was conducted in 2022, and reveals that DWP officials were aware of the heavy toll being taken by the poorest welfare recipients.
It said that some people fall into debt because of lifelong money problems, while others are plunged into financial crisis by health problems such as cancer or relationship breakdowns.
One person interviewed for the report, a 50-year-old self-employed builder, was diagnosed with cancer while building his own house. He ran through his savings and owed “tens of thousands” to his family and on credit cards. He was unable to return to manual labour due to the effects of chemotherapy, and claimed several health-related benefits.
He told the DWP researchers: “If [those benefits were] in place from the start, I wouldn’t be in debt in the first place.”
People interviewed by DWP researchers said they were unable to save money, so could not cope with emergencies such as a broken fridge-freezer or washing machine, or the need for a new baby bottle or school uniforms.
“Where participants felt they had no hope of improving their financial situation, the mental health impacts were particularly devastating,” the DWP report said.
“Some felt so helpless to change their situation that they had considered suicide, and several indicated that they no longer cared what happened to them.”
Only one in 20 UC claimants in debt said their financial situation had no impact on their mental health.
The difficulty of juggling bills meant benefit claimants in debt would face extra costs, such as late payment fines.
There was “constant deficit”, the report said, because claimants in debt needed to spend their whole income on day-to-day costs.
More than 80% of UC claimants said being in debt had affected their work opportunities, including “limiting the catchment area for work opportunities due to transport costs and restricting the type/variety of work that could be applied for”.
Rachelle Earwaker, a senior economist at the Joseph Rowntree Foundation, said: “One of the key things the report shows is that universal credit claimants, particularly those who are experiencing deductions, are facing fairly severe forms of financial hardship. [They have] really, really limited options on where they can go to access credit.”
Universal credit needs to rise by £30 a week to cover the cost of essentials, Earwaker said, and housing benefit also needed to rise to cover the cost of rent.
