Families who lost loved ones to Covid-19 while they were working on the front line could be stripped of their social security payments, it has been claimed.
Under the NHS and Social Care Coronavirus Life Assurance Scheme, a £60,000 lump sum given to relatives of workers who die after contracting coronavirus is being treated as capital in means-tested benefits.
This means that, under current rules, a family entitled to Universal Credit, Housing Benefit or Pension Credit would lose their entitlement.
Labour has warned ministers that families are having to choose between losing access to benefits or receiving a compensation payment.
The party has called for such payments to be disregarded in the same way as other schemes such as the Windrush Compensation Scheme or those who hold a Victoria or George Cross.
It has also previously requested that the £16,000 upper capital limit is removed during the pandemic with a rise in Universal Credit claims.
Shadow work and pensions secretary Jonathan Reynolds said families must be allowed to grieve with the full support they are right to expect.
“Health and social care workers are putting their lives on the line to care for coronavirus patients, often without the proper equipment, and many have sadly lost their lives as a result,” he said.
“The Government was right to say we must honour those who have made the ultimate sacrifice.
“So it is shocking that families are being forced to choose between accessing social security they are entitled to or the compensation they need.
“This must change so that families can grieve in peace with the full support they have every right to expect.”
Liberal Democrat MP Layla Moran said: “It is utterly shameful that bereaved families of NHS and care workers face losing access to benefits if they receive a payment from the Covid-19 compensation scheme.
“This scheme was set up to provide financial security and comfort to the loved ones of those who tragically died on the front line against coronavirus.
“This exercise in penny-pinching is completely tone deaf and risks rubbing salt in the wounds of grieving families. The Government must scrap this senseless rule immediately.”
A Government spokesman said: “The death of any healthcare worker is a tragedy.
“Since it began in May, the life assurance scheme has already provided additional financial security to families of frontline NHS and social care workers in England who have died due to coronavirus.
“It has always been one of the central principles of Universal Credit that decisions on awarding the benefit should take into account individuals’ existing ability to meet their basic needs, so that we maintain our focus on supporting families in most need.”