The government is cutting benefit payments to some of Britain’s poorest families or threatening them with debt collectors in a raid that is “plunging people into poverty”.
More than a million people have had their universal credit payments cut over the past year because they were overpaid tax credits in the past by HMRC.
Some of these debts are decades-old and in many cases the claimant was not at fault for the overpayment or aware that the debtexisted.
Campaigners and MPs called on the government to immediately pause the deductions, an approach that they warned was causing widespread destitution at a time when people are already struggling with the cost-of-living crisis.
Millions docked because of historical overpayments
Official figures obtained by Sky News show that last year 1.3 million universal credit claimants had payments docked because of historical tax credit overpayments.
It’s a figure that’s been on the rise.
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In total, the Department for Work and Pensions (DWP) deducted £372.576m from claimants on HMRC’s behalf.
Tax credits were introduced in 1999 by the then Labour government to encourage people into work by offering support payments to parents and those on low incomes.
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The system is being phased out and people on tax credits will all have moved to Universal Credit by the end of next year.
In 2014 the Treasury agreed with the DWP that, as previous tax credit claimants moved onto Universal Credit, their old tax credit debts would be transferred and collected under the new system.
Blaming claimants for HMRC errors
While HMRC maintains that many of these erroneous payments are down to fraud or errors made by the claimant, a significant number are attributable to errors made by officials.
Charities warned that in some cases HMRC was blaming claimants for errors of its own making.
Michelle Welch from Bromley, south London, is one such case. She was facing deductions of £20 a month to recover an eight-year-old debt of £2,379.26.
Image: Michelle Welch
The mother of three, who now works part-time at a British Heart Foundation charity shop, was hospitalised in October 2015 after suffering a mental health crisis.
Although a support officer telephoned HMRC to explain that she was no longer caring for her three children, HMRC did not stop the payments and the money continued being paid into a bank account that her partner was accessing to support her children.
After multiple attempts to notify the agency, the payments eventually stopped on 28 January 2016.
Years later, in August 2021, HMRC wrote to Ms Welch demanding that she repay the money the agency overpaid in the interim. They claimed she failed to notify them of her change in circumstances in time and her universal credit was docked as a result.
Ms Welch’s multiple appeals were rejected.
“I’m just living day by day. I can’t save. I can’t go out… I could put that extra money on gas and electric,” she said.
“I just feel like I’m not getting anywhere. I’m not getting anywhere fast.”
After Sky News intervened, HMRC agreed that Ms Welch was not at fault and has now cancelled the debt.
“We apologise to Ms Welch for the inconvenience and upset caused by our mistake,” HMRC said. “We’ve acted to correct her payments and a redress payment will be made.”
Ms Welch said her dealings with HMRC and DWP had left her feeling dejected, ignored and stuck in what was a difficult time in her life.
“It’s hard for a mother to give up one child let alone three because they’re mentally unwell. It wasn’t an easy thing to do. [It takes me back to] a place I would never want to be in again. It makes me feel ashamed and terrible.
“I busy myself so that I don’t have to think back to what I went through and what my children went through. It’s something I should talk to a psychiatrist about, not people I don’t know [at HMRC and DWP].”
Not an isolated case
Sky News spoke to dozens of claimants who said they were paying back debts they do not believe, or did not realise, they owed.
Many struggled to get a clear breakdown or explanation from HMRC when they challenged the demands for payment.
Image: Vicky Timlin
Vicky Timlin, from Cheltenham, ended a tax credit claim in September 2021 after moving in with a partner.
She was then told to repay back £909.29 that had been overpaid to her. When she sought an explanation, an HMRC representative told her that the overpayment could only be explained by a “computer glitch” but she would have to repay it regardless.
Ms Timlin is not claiming Universal Credit so her payments have not been docked.
However, HMRC has warned her that the debt will be recouped through any future universal credit claim. Her debt has now been passed onto a private debt collection agency and she is on a payment plan for the next seven years.
Sky News understands that 29,000 cases are now being handled by private debt collection agencies.
“I felt completely helpless. I got off the phone and I was in absolute floods of tears because I just felt like this is so unfair.
“Why have I got to pay this money because of a computer glitch and there was literally nothing that I can do about it and they didn’t seem to care at all,” she said.
“They shouldn’t be doing it to people. They need to be able to explain to people properly why they owe this money and not give them different excuses every time.”
HMRC accepted that Vicky did nothing wrong and apologised for its failure to clearly explain the debt to Ms Timlin.
It maintained that she had been overpaid because previous re-calculations of her entitlement had triggered the system to generate duplicate payments.
It said this was a feature of the system and that these overpayments would have balanced out across the remainder of the financial year had she continued with the claim.
“To ensure customers receive regular payments of a similar amount, tax credits awards are calculated across the 12-month financial year,” HMRC said.
“Customers are required to tell us of any change in circumstances and when they do, awards are recalculated and balanced across the remainder of the period. This means when a claim ceases during the financial year, in some instances an overpayment may be due.”
Official errors disguised
Official reports published by HMRC suggest that errors on the part of officials make up a very small proportion of overpayments, compared to fraud and errors on the part of claimants.
However, charities pointed out that in many cases officials were contributing to errors by providing poor advice on the phone. In the case of Ms Welch, official error was disguised as a claimant error.
Campaigners say the system is causing widespread distress at a time when the cost-of-living crisis is already driving families into poverty.
Food bank visitors in debt to the government
The Trussell Trust, which oversees a network of more than 1,300 food banks across the UK, has said the vast majority of its visitors were in debt to the government.
MPs from across the political spectrum have urged the government to pause collections while the cost-of-living crisis is still raging.
Image: Stephen Timms, MP for East Ham
Stephen Timms, MP for East Ham and chair of the work and pensions select committee, said: “People are completely unaware of these debts when suddenly money starts getting taken out of their Universal Credit monthly payments and, in a cost-of-living crisis with inflation running at current levels, that’s causing real hardship for people.
“So my select a committee, which is an all-party committee with a Conservative majority, recommended that the government should pause these deductions while inflation is running at its current level.
“Unfortunately, the government rejected that recommendation, but I think that would be very helpful just to support people through this really, really difficult time.”
Naguib Kheraj, the City veteran, has been shortlisted to become the next chairman of HSBC Holdings, Europe’s biggest bank.
Sky News can reveal that Mr Kheraj, a former Barclays finance chief, is among a small number of contenders currently being considered to replace Sir Mark Tucker.
HSBC, which has a market capitalisation of £165.4bn, has been conducting a search for Sir Mark’s successor since the start of the year.
In June, Sky News revealed that the former McKinsey boss Kevin Sneader was among the candidates being considered to lead the bank, although it was unclear this weekend whether he remained in the process.
Mr Kheraj would, in many respects, be seen as a solid choice for the job.
He is familiar with HSBC’s core markets in Asia, having spent several years on the board of Standard Chartered, the FTSE-100 bank, latterly as deputy chairman.
He also possesses extensive experience as a chairman, having led the privately held pensions insurer Rothesay Life, while he now chairs Petershill Partners, the London-listed private equity investment group backed by Goldman Sachs.
Mr Kheraj’s other interests have included acting as an adviser to the Aga Khan Development Board and The Wellcome Trust, as well as the Financial Services Authority.
He spent 12 years at Barclays, holding board roles for much of that time, before he went on to become chief executive of JP Morgan Cazenove, the London-based investment bank.
HSBC’s shares have soared over the last year, rising by close to 50%, despite the headwinds posed by President Donald Trump’s sweeping global tariffs regime.
In June, the bank said that Sir Mark would be replaced on an interim basis by Brendan Nelson, one of its existing board members, while it continued the search for a permanent successor.
Ann Godbehere, HSBC’s senior independent director, said at the time: “The nomination and corporate governance committee continues to make progress on the succession process for the next HSBC group chair.
“Our focus is on securing the best candidate to lead the board and wider group over the next phase of our growth and development.”
Sky News revealed late last year that MWM, the headhunter founded by Anna Mann, a prominent figure in the executive search sector, was advising HSBC on the process.
Since then, at least one other firm has been drafted in to work on the mandate.
Sir Mark, who has chaired HSBC since 2017, steps down at the end of next month to become non-executive chair of AIA, the Asian insurer he used to run.
He will continue to advise HSBC’s board during the hunt for his long-term successor.
As a financial behemoth with deep ties to both China and the US, HSBC is deeply exposed to escalating trade and diplomatic tensions between the two countries.
When he was appointed, Mr Tucker became the first outsider to take the post in the bank’s 152-year history – which has a big presence on the high street thanks to its acquisition of the Midland Bank in 1992.
He oversaw a rapid change of leadership, appointing bank veteran John Flint to replace Stuart Gulliver as chief executive.
The transition did not work out, however, with Mr Tucker deciding to sack Mr Flint after just 18 months.
He was replaced on an interim basis by Noel Quinn in the summer of 2018, with that change becoming permanent in April 2020.
Mr Quinn spent a further four years in the post before deciding to step down, and in July 2024 he was succeeded by Georges Elhedery, a long-serving executive in HSBC’s markets unit, and more recently the bank’s chief financial officer.
The new chief’s first big move in the top job was to unveil a sweeping reorganisation of HSBC that sees it reshaped into eastern markets and western markets businesses.
He also decided to merge its commercial and investment banking operations into a single division.
The restructuring, which Mr Elhedery said would “result in a simpler, more dynamic, and agile organisation” has drawn a mixed reaction from analysts, although it has not interrupted a strong run for the stock.
During Sir Mark’s tenure, HSBC has also continued to exit non-core markets, selling operations in countries such as Canada and France as it has sharpened its focus on its Asian businesses.
On Friday, HSBC’s London-listed shares closed at 946.7p.
Shares in UK banks have fallen sharply on the back of a report which urges the chancellor to place their profits in her sights at the coming budget.
As Rachel Reeves stares down a growing deficit – estimated at between £20bn-£40bn heading into the autumn – the Institute for Public Policy Research (IPPR) said there was an opportunity for a windfall by closing a loophole.
It recommended a new levy on the interest UK lenders receive from the Bank of England, amounting to £22bn a year, on reserves held as a result of the Bank’s historic quantitative easing, or bond-buying, programme.
It was first introduced at the height of the financial crisis, in 2009.
The left-leaning think-tank said the money received by banks amounted to a subsidy and suggested £8bn could be taken from them annually to pay for public services.
It argued that the loss-making scheme – a consequence of rising interest rates since 2021 – had left taxpayers footing the bill unfairly as the Treasury has to cover any loss.
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Why taxes might go up
The Bank recently estimated the total hit would amount to £115bn over the course of its lifetime.
The publication of the report coincided with a story in the Financial Times which spoke of growing fears within the banking sector that it was firmly in the chancellor’s sights.
Her first budget, in late October last year, put businesses on the hook for the bulk of its tax-raising measures.
Ms Reeves is under pressure to find more money from somewhere as she has ruled out breaking her own fiscal rules to help secure the cash she needs through heightened borrowing.
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Is Labour plotting a ‘wealth tax’?
Other measures understood to be under consideration include a wealth tax, new property tax and a shake-up that could lead to a replacement for council tax.
Analysts at Exane told clients in a note: “In the last couple of years, the chancellor has been protective of the banks and has avoided raising taxes.
“However, public finances may require additional cash and pressures for a bank tax from within the Labour party seem to be rising,” it concluded.
The investor flight saw shares in Lloyds and NatWest plunge by more than 5%. Those for Barclays were more than 4% lower at one stage.
A spokesperson for the Treasury said the best way to strengthen public finances was to speed up economic growth.
“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms,” they added.
The man dubbed “Britain’s most hated boss” for his controversial policy of sacking hundreds of seafarers and replacing them with cheaper agency staff is to quit.
Sky News can exclusively reveal that Peter Hebblethwaite, the chief executive of P&O Ferries, is leaving the company.
Sources said he had decided to resign for personal reasons.
Mr Hebblethwaite joined the ranks of Britain’s most notorious corporate figures in 2022 when P&O Ferries – a subsidiary of the giant Dubai-based ports operator DP World – said it was sacking 800 staff with immediate effect – some of whom learned their fate via a video message.
The policy, which Mr Hebblethwaite defended to MPs during subsequent select committee hearings, erupted into a national scandal, prompting changes in the law to give workers greater protection.
Under the new legislation, the government plans to tighten collective redundancy requirements for operators of foreign vessels.
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In a statement issued in response to a request from Sky News, a P&O Ferries spokesperson said: “Peter Hebblethwaite has communicated his intention to resign from his position as chief executive officer to dedicate more time to family matters.
Image: Peter Hebblethwaite gives evidence to a committee of MPs in 2022. Pic: PA
“P&O Ferries extends its gratitude to Peter Hebblethwaite for his contributions as CEO over the past four years.
“During his tenure the company navigated the challenges of the COVID-19 pandemic, initiated a path towards financial stability, and introduced the world’s first large double-ended hybrid ferries on the Dover-Calais route, thereby enhancing sustainability.
“We extend our best wishes to him for his future endeavours.”
A source close to the company said it anticipated making an announcement on Mr Hebblethwaite’s successor in the near term.
A former executive at J Sainsbury, Greene King and Alliance Unichem, Mr Hebblethwaite joined P&O Ferries in 2019, before taking over as chief executive in November 2021.
Insiders claimed on Friday that he had “transformed” the business following the bitter blows dealt to its finances by the COVID-19 pandemic and – to some degree – by the impact of Britain’s exit from the European Union.
Image: A union protest is shown at the height of the mass sackings row in 2022
P&O Ferries carries 4.5 million passengers annually on routes between the UK and continental European ports including Calais and Rotterdam.
It also operates a route between Northern Ireland and Scotland, and is a major freight carrier.
The company’s losses soared during the pandemic, with DP World – its sole shareholder – supporting it through hundreds of millions of pounds in loans.
Its most recent accounts, which were significantly delayed, showed a significant reduction in losses in 2023 to just over £90m.
The reduction from the previous year’s figure of almost £250m was partly attributed to cost reduction exercises.
The accounts also showed that Mr Hebblethwaite received a pay package of £683,000, including a bonus of £183,000.
“I reflected on accepting that payment, but ultimately I did decide to accept it,” he told MPs.
“I do recognise it is not a decision that everybody would have made.”
The row over his pay was especially acute because of his admission that P&O Ferries’ lowest-paid seafarers received hourly pay of just £4.87.
Mr Hebblethwaite had argued since the mass sackings of 2022 that the company would have gone bust without the drastic cost-cutting that it entailed.
The company insisted at the time that those affected by the redundancies had been offered “enhanced” packages to leave.
Last October, the then transport secretary, Louise Haigh, said: “The mass sacking by P&O Ferries was a national scandal which can never be allowed to happen again,” adding that measures to protect seafarers from “rogue employers” would prevent a repetition.
“This issue has been ignored for over 2 years, but this new government is moving fast and bringing forward measures within 100 days,” Ms Haigh added.
“We are closing the legal loophole that P&O Ferries exploited when they sacked almost 800 dedicated seafarers and replaced them with low-paid agency workers and we are requiring operators to pay the equivalent of National Minimum Wage in UK waters.
“Make no mistake – this is good for workers and good for business.”
The minister’s description of P&O Ferries as “rogue”, and suggestion that consumers should boycott the company, sparked a row which threatened to overshadow the government’s International Investment Summit last October.
Sky News’s business and economics correspondent, Paul Kelso, revealed that DP World had withdrawn from participating in the event, and paused a £1bn investment announcement.
The company relented after Sir Keir Starmer publicly distanced the government from Ms Haigh’s characterisation of DP World.