Expect 8pc interest on SMI payments

Burgess believes the additional charge, expected to take effect from April next year, will take precedence over any mortgage commitments and so reduce the amount payable to homeowners and lenders.

He said: “This is daylight robbery; I’ve received information suggesting homeowners who struggle to pay their mortgages will soon have to pay back more than the amount of ‘benefits’ - or loans - they received in the first place.

“Mortgages are now available at three per cent, so how can the DWP justify a rate which is nearly three times higher?”

Burgess said repeated requests for clarification on this issue have been declined. The DWP, however, confirms any future SMI changes would be subject to consultation.

Recipients of Legal Aid who retain money or property following civil cases are often required by the Legal Aid Agency to pay an eight per cent statutory charge on their assets.

In response to a Parliamentary question in March 2012, the then junior justice minister Jonathan Djanogly said: “Statutory charges would be repaid ‘immediately’ but where they were not, would attract simple interest”. He suggested: “The rate of eight per cent was intended to encourage people owing money to pay promptly”.

“Outrageous” concluded Burgess.