The Government must pause benefits deductions to give struggling households “much-needed breathing space” during the cost-of-living crisis, MPs have said.

Automatic payments to the Government and others, taken out of people’s benefits, should be halted as claimants battle soaring costs, the Work and Pensions Committee said.

Deductions are taken by the Department for Work and Pensions (DWP) from people’s benefits to pay off debts, which could include advance payments of benefits, and previous errors or overpayments of benefits by the Government.

For example, new Universal Credit claimants face a five-week wait while their claim is assessed before receiving their first payment.

If they need an advance payment to help them through this period, this will be deducted from the amount they receive each month going forward.

Deductions can also be taken to cover some third-party debts, such as rent arrears.

Charities say people with deductions are being left without enough money to afford food or pay their bills, with some claimants turning to food banks to survive.

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Earlier this year, a report from Lloyds bank foundation found that deductions are “confusing, unmanageable, and forcing people into hardship, often through no fault of their own”.

It called for an immediate review of universal credit deductions, which it said “are primarily the explicit result of Government policy, not individual behaviour”.

The committee’s report, Cost of Living, calls for deductions to be paused and gradually restored only when inflation reduces, or if benefits are increased to accurately reflect the cost of living.

It recommends that the Government reviews and increases the benefit cap, which has been frozen since 2016, urgently and before the end of the year at the latest.

While the MPs welcomed measures to help low-income households through the cost-of-living crisis, they advise limiting the use of one-off payments as regular income is better for people trying to budget.

Sir Stephen Timms, Labour MP and committee chairman, said: “Inflation is at a 40-year high, with spiralling energy, food and fuel prices adding up to a cost of living crisis not seen for a generation and a bleak outlook for many families.

“Deductions by DWP from benefits are contributing to the hardship and the Government should give those struggling some much needed breathing space by following its own advice to other creditors and pausing repayments until the threat of inflation recedes.”

Sir Stephen said a properly functioning safety net should be able to respond to worsening economic situations.

But this year benefits were uprated in line with an inflation rate that was seven months out of date – rising 3.1% in April in line with the Consumer Prices Index (CPI) inflation rate in September 2021.

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He added: “The Government must urgently increase the speed with which the DWP’s systems can make changes to benefit and pension rates to make sure the social security safety net lives up to its name for the most vulnerable people in our society.”

Balbir Kaur Chatrik, Centrepoint’s director of policy, said that with Parliament in recess and a new prime minister yet to be decided, it is “impossible to see how these urgently needed interventions can be acted upon in time for some of the most vulnerable”.

She continued: “At a time when young people tell us they are skipping meals and living without power in their homes it seems absurd in the extreme that some of them have been forced into this by the Government clawing back up to a quarter of their universal credit payment, particularly when they are already struggling.”

A DWP spokesman said: “We’ve reduced the amount that can be taken through benefit deductions twice in recent years to no more than 25%. We’ve also doubled the time period over which they can be repaid and claimants can contact DWP to discuss deductions if they are experiencing financial hardship.

“We recognise people are worried about the impact of rising prices, that’s why we’re providing £37 billion of additional cost of living support. This includes £1,200 in direct payments for eight million low-income households, most of whom received an initial £326 earlier this month.

“As part of our support package, we’ve also frozen energy deductions on Universal Credit, meaning any new request from energy suppliers for bills to be paid directly from benefits, or for an existing payment to rise, is denied unless the claimant also requests it.”