Money Wellness
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calendar icon15 Apr 2024

How have changes across the UK impacted universal credit and its claimants?

Universal credit has been the biggest benefit reform in a generation, and by 2029 it’s predicted to cover 7 million families. The Resolution Foundation carried out research about how the current universal credit system compares to the legacy benefit system it replaces and how changes in the UK over the last decade have changed its impact.

What did the Resolution Foundation find?

There are 9.8 million eligible families for universal credit. 71% of these families are currently worse off on universal credit in 2024-25 than they would have been under the legacy system in 2013-14. The findings show that the difference between universal credit and legacy benefits is -£1,400 per year.

It’s important to note that this is due to cuts in overall levels of working-age support, rather than the design of universal credit.

The move from legacy benefits to universal credit has created a mix of winners and losers. For example, working renters are the biggest winners on average. Disabled people are among the biggest losers, especially single people with a disability that prevents them from working –those who would previously have been in the employment and support allowance (ESA) support group and getting of personal independence payment (PIP) – and don’t have a full-time carer.

On the flip side, a couple with two children paying rent at the average local housing allowance on a two-bedroom property will be entitled to universal credit up to gross annual earnings of £67,000 in 2024-25, compared to £42,000 for legacy benefits.

The Resolution Foundation also found that universal credit has reduced the number of people facing very weak incentives to work and earn more, but at the cost of having more people facing what would still be thought of as weak incentives.

There are now 2.7 million people on universal credit, including 840,000 in work – compared to 1.1 million out-of-work jobseekers allowance (JSA) claimants in 2013-14. There is clear evidence that unemployed single people and lone parents claiming universal credit move into work more quickly than those on JSA, although the overall impact of universal credit isn’t that clear.

The findings also showed that there’s been a rise in the number of universal credit claimants who can’t work due to illness or disability. In April 2013, there were 1.2 million families claiming ESA, but there are now 2.3 million families claiming either ESA or the equivalent elements of universal credit.

The Resolution Foundation states that policy makers must figure out how to adapt universal credit to address many of the challenges of the 2020s, and that they need to recognise the system is operating in a different country from the one when universal credit was announced. One that is “older and sicker, and where the stereotype of younger people making choices not to work is no longer pertinent. The Government has announced reforms to the test for ill-health in Universal Credit, but policy makers should not assume that universal credit alone can shoulder the burden of dealing with the UK’s challenge of rising inactivity through ill-health.  We must not use thinking from the late 2000s to drive policy decisions in the late 2020s.” 

Avatar of Lydia Bell-Jones

Lydia Bell-Jones

With a background in banking, Lydia has been writing professionally for over five years. She is passionate about helping people improve their personal finances and has a particular interest in the connection between money and mental health.

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