Why doesn’t universal credit seem to keep up with essential costs?

Universal credit can offer vital relief to struggling households, but many will still feel the pressure even after getting the payment.

And a new report from the Joseph Rowntree Foundation (JRF) suggests this is because of how benefit payments are calculated.

The report says it isn’t worked out using any clear measure of what people actually need to live on and instead based - in part - on political considerations.

As a result, the basic rate doesn’t go far enough to cover the cost of everyday essentials, like food and energy.

In fact, the JRF believes that while the cost of living has continued to rise, the basic rate of benefits has fallen by about 9% in real terms since 2010.

Households facing a shortfall next year

The JRF estimates that in 2026/27, a single adult will need £120 a week to cover the cost of essentials like household bills, food and clothing.

And that number goes up to £205 for a couple.

But the report suggests that based on these figures, single adults on universal credit face a shortfall of £22 a week, while couples are short by around £51.

This, it says, is forcing many households to make impossible choices, such as skipping meals and turning the heating down.

What could be done differently?

The government is now being urged to rethink how universal credit rates are set.

Instead of automatically adjusting last year’s figure, JRF has called for an independent process that recommends benefit rates based on evidence.

This, it says, could include real-world data on household costs and insight from people with direct experience of living on a low income.

“Most people would expect universal credit to be based on a logical calculation, such as the cost of life’s essentials,” the JRF commented.

“But it never has been. 

“This is leaving families going without food, utilities and vital household items.”

What can I do if I'm struggling with rising costs?

If you're finding it hard to keep up with everyday expenses, there are practical steps you can take.

Check what benefits you can claim 

Make sure you know what financial support you can get, as you might be entitled to help without realising it.

Use our benefits calculator to see what help you could be eligible for.

Review your spending

Work out exactly how much money you’ve got coming in and where it’s going.

You can then prioritise your spending and see where you can make savings.

Check out our guide to how to create a budget to get started.

And give our budget planner a try - it’s free and easy to use.

Get help with your debts

If you’re struggling with debt, get in touch for confidential, practical and impartial debt advice.