Government welfare policy proves a boon for Leeds loan sharks

Mark Cantrell
14 min readFeb 3, 2023


Study finds £18m a year deducted from benefits, sinking people deeper into poverty and for some a desperate flight into the arms of dodgy lenders

Stock image courtesy of Pixabay.

BUSINESS is booming for loan sharks in Leeds, West Yorkshire, thanks to government policy plunging city residents into desperate poverty.

Well, that’s one way of looking at it. Another is to consider recent research that points to pretty much the same thing, but without the (quite so) loaded language.

In a study led by a team from Leeds University’s School of Sociology & Social Policy (SSSP), it was found that a staggering £18 million per year in Universal Credit payments is being “withheld” from city residents claiming the benefit.

Some of these deductions are taken to cover debts to third parties; often it is clawed back to repay advance loans provided by the Government’s Department for Work & Pensions (DWP) to see people through until their benefit payments begin.

According to the team’s report, Deep Poverty: Everyday Financial Crisis in Leeds, published in November 2022, these cash deductions from the “already low level of their benefits” are having a “devastating impact” on some of the poorest households in the city.

Many of them live in the city’s most deprived districts — such as Armley, Gipton, and Harehills — and are turning to desperate measures to survive, such as loan sharks and other high-interest lenders. It’s a grim situation, with portentous consequences for those communities sinking deeper into debt.

“The economic gap between Leeds and the rest of the UK has widened in recent years, pushing some into deeper, more severe financial crisis,” said the SSSP’s Dr Daniel Edmiston, lead author of the report.

“Rising inflation is increasing the risk and severity of poverty. Rather than acting as a safety net at this difficult time, the social security system is functioning as a debt collector for many with 45% of Universal Credit claimants losing up to 25% of their entitlement due to benefit deductions, recovery of advance payments or arrears.”

Making work pay

Universal Credit is the Government’s flagship welfare benefit, but it has been dogged by controversy since its introduction in 2013.

On paper, it’s a more responsive and flexible system, combining a number of so-called legacy benefits such as Job Seekers’ Allowance and Housing Benefit, into one monthly payment. Universal Credit is aimed at those in low-paid work, as much as those who are unemployed and seeking work; billed as a vehicle to “make work pay”.

In practice, however, Universal Credit has often proved inflexible in responding to people’s changing circumstances. It has also gained a draconian reputation; claimants are subject to stern conditionality rules, with harsh sanctions for anyone deemed to have infringed them.

Punishment can mean the loss of benefits for weeks, months — even years in some cases — simply on an official’s say so.

Unlike the previous legacy regime, where Housing Benefit continued to be paid despite stoppages to other payments, under Universal Credit a sanction means the suspension of all subsistence support — be that for food, heat, light, even rent. Inevitably, this leaves people destitute and at a heightened risk of becoming homeless.

All told, Universal Credit — as reams of reports have evidenced over the years — has become a major driver of poverty; inverting the supposed founding purpose of the Welfare State. The benefit’s staggered roll-out across the UK has been tracked by increases in rent arrears, the rise of food banks, and a general descent into bitter hardship. All this years in advance of the current cost-of-living crisis.

Universal Credit is far from the sole harbinger of misery, of course; nor has it been immune to the impact of the Government’s wider welfare reform agenda. Much of its paper positives were themselves whittled away or neutered by reforms elsewhere.

Over the last decade or so, successive welfare reforms have served to reduce the value of social security benefits, while hardening a punitive approach to claimants.

Benefits have been subject to deliberate increase-freezes, combined with below-inflation rises for years, resulting in a cumulative lowering of financial support to poor households. Meanwhile, an overall benefit cap has limited the support any one household can receive.

Support towards housing costs — Local Housing Allowance (LHA) for private renting tenants, Housing Benefit in the social sector, or the housing element of Universal Credit — has likewise been subjected to freezes and below-inflation rises.

Rent, however — whether in the private or the social sector — has not been so laggard when it comes to keeping pace with inflation.

What’s more, LHA was targetted at the bottom 30% of local rental markets. As rents have risen, and the housing support has diminished in value, the availability of housing has only worsened. This has left households ‘high and dry’, requiring them to make up shortfalls in rent to avoid arrears by other means — whether that’s drawing on money intended for subsistence living costs or some form of debt.

In the social sector, meanwhile, tenants face the pernicious impact of the so-called Bedroom Tax. This introduced the fictitious ‘spare room subsidy’ simply so that it could be removed, penalising households deemed to have too many rooms than they need by cutting their housing benefit.

The Bedroom Tax pays little heed to the circumstances of individual households, or to the profile of local housing stocks. Over the years, it has hit households who need ‘spare’ rooms to store equipment for disabled family members; others are left high and dry, unable to move — but placed at risk of homelessness — because there are no smaller properties to which they might move.

The stated purpose was to ‘encourage’ tenants to downsize to a more suitable property and tackle under-occupancy — a genuine problem in the social sector — but it’s been criticised as simply a blunt tool for cutting benefits that causes more problems than it solves.

Back to Universal Credit, and one long-standing criticism is the built-in feature that requires claimants to wait five weeks before they receive their first payment. This is no doubt quite a shock for people experienced with weekly wage cycles — quite naturally to budgeting accordingly — and who likely lack the savings to tide them over.

Hardship funds are available to see people through this initial waiting period, but they take the form of loans that are paid back out of future Universal Credit payments. Many claimants, then, are immediately plunged into debt — even if they don’t already have debts — that will be serviced by deductions from their benefits.

Paying the piper

As the researchers found, these deductions exert a cruel impact on people with already limited means. Far from helping, the DWP is only extracting its share of misery.

The people worst affected regularly skip meals, are not using gas or electric for weeks, and are often pawning their personal possessions. It’s like something out of the Dickensian days of yesteryear, but here, now, in the 21st Century.

Worse, people trapped in a “poverty-debt trap” are digging themselves deeper into a hole in an effort to buy essentials such as food, gas or electricity. Desperate circumstance often provoke desperate measures to cope; a boon for high interest lenders and loan sharks.

“Whilst low benefit levels often necessitated debt accumulation and personal borrowing from (in)formal providers, the social security system itself also functioned as a creditor and debt collector for many participants,” the report notes.

“More than two thirds had been subject to benefit deductions and/or the recovery of advance payments and arrears, whereby the DWP had withheld up to 25% of their entitlement. Such practices are widespread within the benefits system. According to the latest available data, 45% of Universal Credit claimants experienced a deduction to their benefit in February 2022.”

The report goes on to say: “[T]he proportion of Universal Credit claims affected by a deduction has increased since November 2021 and there is considerable variation in the rate of deductions. For example, over half (54%) of claims are subject to a deduction in Leeds East compared to
40% of claims in Leeds North West.

“Cumulatively, these deductions have a profound impact on local economies and the capacity for ‘levelling up’, with £1.51 million a month (or £18.1 million per year) ‘withheld’ from the lowest-income households across Leeds alone.

“Facilitated by the State, these forms of debt consolidation and recovery made it difficult for participants to anticipate what they were going to receive in benefit payments each month. For those reliant on social security as an essential lifeline, reducing the level of benefit entitlements through deductions and debt recovery was devastating with many participants left with almost nothing for food, transport or heating …

“For the majority of participants, personal borrowing and household arrears were necessary to bridge the gap between needs and incomes but this resulted in a poverty-debt trap, making it much harder to escape their financial situation. Private (in)formal lenders were identified as a problem by some but the DWP functioning as a creditor and debt collector also presented a serious threat to livelihoods and household security.”

Perhaps unsurprisingly, given wider aspects of its regime, the study found a distinct lack of trust in the DWP and its officials; a wariness that also extended to third-party organisations attempting to alleviate poverty locally.

“Some people expressed a lack of trust and faith in public institutions, particularly the DWP, to be responsive, consistent, and knowledgeable. Some felt that different statutory services and even different staff within the same agency provided contradictory advice,” said the report.

“The DWP was rarely perceived as a source of support: communication was often dismissed as disingenuous or untrustworthy by participants. The investment of time, energy and work to understand and contest benefit entitlements or administration led some individuals to delay, give up or go without support entirely.

“Despite the vital role of local charities, similar criticisms, albeit to a much less extent, were sometimes levelled at third sector support organisations. In certain cases, participants were looking to third sector providers to resolve deficiencies in the social security system or other issues that could only be addressed by statutory agencies. Those affected were often left feeling frustrated and disempowered.”

Stock image courtesy of Pixabay.

Local assistance

Life goes on, or tries to.

That said, the burden of poverty presses down; for those not caught in such dire straits, the means adopted to alleviate the pressures — even if at least for a brief moment — must seem unfathomable.

As ‘Warren’, a white male in the 45–54 age group told the researchers: “We wanted a Pot Noodle or something. To boil the kettle, I pulled the floorboards up in the house and the skirting boards off the wall as well and burnt them in an open fire to boil the kettle.”

‘Alice’, a white female, aged 35–44, added: “If you haven’t got electric, what are you meant to do, just starve? I’ve been in bins before to try and feed. It’s horrible. It is so horrible. It is, it’s the worst feeling ever.”

Such testimonies shared in the report (see below) make for grim reading. Some readers may grind their teeth in outrage at the circumstances they reveal; others may vent disgust at the ‘lifestyle choices’ of the poor.

Be that as it may, in the highly charged debates that surround poverty, but hardship cares little for our individual sensibilities (or prejudices). Or, indeed, the findings of academic investigation. Survival fosters its own demands — and the scars can run deep.

As Edmiston added: “[D]demand for local support services and charitable food aid is soaring. To minimise energy use, some people are only using a microwave or kettle to prepare meals with knock-on effects on their physical and mental health.”

Despite the trust issues raised in the report, local agencies — including the city council — are praised for their efforts trying to alleviate the vicious cycle of poverty and debt, but ultimately it emphasises that any lasting solution demands changes at the level of national policy.

“Locally, invaluable work is being undertaken by Leeds City Council and third sector organisations to try and support those worst affected by the cost-of-living crisis,” Edmiston said. “Whilst many organisations are providing a crucial lifeline, their capacity is constrained given the current funding climate.”

Lasting solution

Nationally, the report recommends increasing benefits in line with inflation, so that they keep better pace with living costs; also it calls for the introduction of a minimum income guarantee and the abolition of the five-week wait for Universal Credit.

On the local level, the report suggests “improvements” such as extending and protecting funds intended to break the poverty-debt trap; also review services to avoid those on the lowest income “slipping through the cracks”.

Councillor Mary Harland, the city council’s executive member for communities, said the report made for “distressing reading”. Our welfare system should be supporting people to break out of poverty, not causing it,” she added.

According to Citizens Advice Leeds, the university team’s research “underlines” what the organisation has been seeing “for many months now”.

“People who were already struggling are now in absolute crisis, unable to pay for the necessities of day to day living,” said its chief executive, Dianne Lyons. “Leeds City Council and many local charities are doing extraordinary work to help people through the cost of living crisis, but the real solutions depend on national policy decisions.”

Tracy Brabin, the elected mayor of West Yorkshire, said she was appalled at the report’s findings, calling the situation a “stain on our national conscience”.

“I pay tribute to the fantastic work underway across West Yorkshire to provide food banks, warm spaces and debt advice for the most vulnerable,” she added.

“But the findings in this report are absolutely appalling — it is a stain on our national conscience that people are cold and hungry in the sixth richest country in the world.

“For months we’ve been calling for an increase to Universal Credit, but the Government is idly standing by while people suffer. Enough is enough.”

Leeds is the focus here, but it is hardly unique in its experience of extreme hardship; national policies breed national conditions, however much they might vary locally. Indeed, Edmiston and his team say the city’s experience are “likely to be replicated” across the country thanks to the nationwide grip of the cost-of-living crisis.

Politicians and commentators often choose to blame the character or the ‘lifestyle choices’ of the poor for their poverty; it’s an age-old trope, after all.

In a way, though, they’re right about choices: they’re those of affluent policymakers far removed from the consequences of their decisions. The poor just pay the price.

For that, the loan sharks of Leeds, at least, have reason to be thankful.

Voices from the breadline

SOME of the testimonies shared in the Deep Poverty report make for grim reading. They illustrate snapshots of deprivation in what is otherwise a thriving 21st Century city…

“I was supposed to be keeping it for my daughter, but I actually sold my wedding ring and engagement ring just so I can top up the electric.” Jenny, female, white, 25–34

“I think it was a weekend and my gas and electric had gone, so I ended up selling my phone just to put it on over the weekend because I couldn’t get any money.” Ellie, female, white, 25–34

“I have to turn off every plug it is mad and I’ve even heard round here everyone’s blooming electric meters beep all the time [on emergency credit]… it’s awful and you can’t do it and then I’ve been here before for like two weeks without electric.” Alice, female, white, 35–44

“I’m sick every morning, that’s how bad my anxiety is… like managing finances, whatever I’ve had in place, nothing’s working. I’ve got this looming headache of a situation where come next month I might not have a roof over my head, and it’s like, what’s next? Where do I go? There’s no doors open for me.” Keiran, male, white, 35–44

“I wouldn’t like to have anybody live like this, because it’s not good. This is not good, because this is heart attack material. I had a heart attack, and basically I had a stroke. It’s not good for you. I actually felt better when I was in the hospital because I knew there was people around me looking after me.” Abel, male, Black, 55–64

“I’m depressed to death. If it weren’t for [a friend] coming and helping like go to the shops for me and stuff like that, I reckon I’d have had committed suicide a long time ago. I’m being serious. I don’t, I don’t go nowhere. I don’t do nowt [nothing].” Wesley, male, white, 45–54

Deep Poverty: Everyday Financial Crisis in Leeds was supported by the British Academy and the Wolfson Foundation. The Leeds University researchers worked with a range of agencies to produce the report, including the city council, GIPSIL, Hamara, Touchstone, Money Buddies, BARCA, Better Leeds Communities, and Citizens Advice Leeds.

Stock image courtesy of Pixabay.

Go figure, cash is better at tackling poverty

Leeds’ ‘cash first’ pilot surely demonstrates need for more generous social security benefits

FUNNILY enough, giving cash — rather than food parcels — to people faced with hardship has proven a more effective means of helping them cope.

That’s according to the findings of a ‘cash first’ approach piloted by Leeds City Council, working with food bank operators, Leeds Food Aid Network (LFAN), Leeds North & West Foodbank, and the Trussell Trust.

Research published in November 2022, carried out in the wake of the pilot, has further reinforced the message, the council says.

According to this research, 94% of grant recipients preferred a cash option rather than a food parcel. Furthermore, 78% said that their ability to afford the essentials improved during the grant period.

All told, the scheme delivered 187 cash grants totalling £45,450 that went to support 283 individuals who were in financial crisis.

The follow up research found that 90% of the people taking part experienced an improvement in their overall finances during the grant period. What’s more, 86% did not use a food bank while they were in receipt of the grant.

Longer term, the impacts of the scheme have included the ability to accumulate small amounts of savings, increased confidence in financial management, debt repayment, and the purchase of durable household items.

Danni Malone, the Trussell Trust’s director of network programmes and innovation, called the pilot a “vital and timely” demonstration for the “impact of maximising incomes”.

“Food banks should never be the first port of call when people face a shortfall in their income, which leaves them unable to afford the essentials,” Malone added.

“A food parcel is not going to help pay the gas bill, get a taxi to a hospital appointment, or support with securing a new tenancy… [The pilot] is a brilliant example of how local government and community organisations can work together towards a society where people do not have to turn to emergency food aid as their first port of call.”

The benefits of this ‘cash first’ approach were not just financial, nor were they restricted to the individuals taking part; it eases some of the pressure faced by food banks, at a time when demand for their services has risen.

Poverty often brings with it indignity; supporting people in financial crisis in a way that helps preserves a sense of self-respect, then, was a factor in the design of the scheme. So, too, was creating a system that offers flexibility, choice, speed and convenience; one that helps people afford the essentials without having to use a food bank.

The council says it is now looking to “embed” this ‘cash first’ approach within its provision of local welfare support, as well as using the research to consider how future schemes can be improved.

“We are absolutely committed to tackling poverty and inequalities and we work closely with a network of partners to deliver for the most vulnerable in our city,” said Councillor Mary Harland, the city council’s executive member for communities.

“Given the current cost of living crisis, it is especially important to ensure that the council’s local welfare support scheme is comprehensive and able to meet the needs of our most vulnerable residents.”


First published on outHouse, a Substack newsletter, 30 January 2023.



Mark Cantrell

A UK writer and journalist, Mark Cantrell is also the author of two novels: Citizen Zero and Silas Morlock. Read more of his work at