More than 500,000 children are living in families in debt to the Department for Work and Pensions (DWP), according to new figures which lay bare the scale of the benefits loan trap.
At least 800,000 households on universal credit are having money deducted from their monthly payments to repay loans that helped them survive the five-week wait until their first benefits came in, data obtained by Citizens Advice shows.
The figures, released under freedom of information laws, show that 13 per cent of all universal credit households are forced to take out loans from the DWP to make ends meet.
Analysis from Citizens Advice shows that more than 500,000 children are in families repaying loans to the government, with an estimated £143m clawed back from them last year.
Joined by campaigners and politicians, the charity has called on chancellor Rachel Reeves to turn the loans into grants at her upcoming Budget to bring an end to the “debt trap”.
Tina, from Kent, is four weeks into her wait for UC, having migrated from employment support allowance (ESA). The experience has been “horrible”, she said, leaving her with just £3.75 and worsening mental health.
“Before the debt gets too high, I want to pay the bills off that are coming in. I want to get fresh food in. I want to put some money on my gas and electric. But I can’t,” she said.
“I sit here on an evening and think, ‘No, I won’t put the lights on.’ Even my phone isn’t going to last much longer, but I haven’t got the money to even order a new cable. I’ve got £13 to put on my electric. How long is that going to last me?”
Tina, who didn’t want to use her last name, is now £240 in debt and relying on a community café for food and support. She is receiving advice from a Christians Against Poverty (CAP) debt coach, with the charity calling the five-week delay for first universal credit payments “devastating”.
Under current rules, claimants are offered the loan by job coaches to cover the five weeks until the first payment. The loan size is typically the full value of the person’s universal credit entitlement.
If they accept, it is later deducted from their monthly universal credit payments – leaving many families struggling to afford their most basic living costs on the reduced payments.
Labour MP for Liverpool Riverside, Kim Johnson MP, who has campaigned for the two-child benefit cap to be scrapped, said: “Once again, we see the government pushing the cost of its broken welfare system onto the very families who can least afford it.
“Forcing people to take out loans just to survive the five-week wait for universal credit is trapping hundreds of thousands of children in poverty and pushing parents into debt and using food banks. These loans must be turned into grants in the Autumn Budget. Ministers cannot ignore the human cost of this policy any longer.”
Dame Clare Moriarty, chief executive of Citizens Advice, said: “The five-week wait for universal credit is forcing many families into debt to the government before they’ve even received their first payment. We’re helping parents relying on food banks because of it. Universal credit was meant to provide a safety net, not trap people in debt from day one.”
She urged Ms Reeves to use her upcoming Autumn Budget to “replace these damaging loans with grants”, adding: “No family should have to borrow money just to eat while waiting for support they’re entitled to.”
Children’s commissioner Dame Rachel de Souza said: “As families struggle with rising costs, these statistics show that many are being forced to make difficult decisions to provide for their children, leaving almost a million households trapped in what can feel like a relentless cycle of debt, as they wait five weeks for their first universal credit payment.”
She urged the government “to be ambitious” in its new child poverty strategy and backed calls to end the two-child benefit limit.
Stewart McCulloch, chief executive of charity Christians Against Poverty (CAP), backed the call to turn the loans into grants. He said: “This five-week wait isn’t a glitch: it’s built into the system, forcing new claimants to survive more than a month with no income or to begin their claim in debt.”
The latest freedom of information data is from February 2025, but the numbers stay roughly the same each month, meaning they are representative of the current number of families in debt.
A DWP spokesperson said: “Advances are not a loan and so no interest is charged, nor any enforcement action taken. They are available for new and existing customers that urgently need support.
“We are reviewing universal credit to make sure it is doing the job we want it to. We are committed to considering how we can support people during the initial assessment period, often referred to as the five-week wait, before they receive their first payment as part of the review and will provide an update in due course.”
‘I was left with £3.75 to my name after a devastating delay to my benefit payments’
Ministers barred from using emergency Treasury funds for public sector pay rises
No more bailouts to fund public sector pay rises, cabinet ministers warned
Badenoch vows to abolish stamp duty as she closes Tory conference
Imam pleads guilty to allowing illegal marriage of children at mosque
Charles and Camilla given Lego figurines of themselves during village visit
