Universal credit is falling £890 a month short of the cost of living, despite inflation-linked uprating
The gap between universal credit rates and the cost of living has increased by £80 a month, according to new analysis by the New Economics Foundation
24 May 2023
Universal credit payments for single people over 25 are falling £890 a month short of the cost of living because rates are not benchmarked to a meaningful assessment of need, according to new analysis by the New Economics Foundation. This is despite the 10.1% April 2023 inflation-linked uprating of universal credit and additional cost of living payments. This shortfall has increased by £80 a month since last April. The gap between the cost of living and the basic rate of support for couples over 25 has increased by £140 to £1,550 a month.
This analysis is based on a comparison to the Minimum Income Standard (MIS), which calculates what people need to meet a basic standard of living and is developed in consultation with members of the public.
The basic level of support for a single person over 25 on universal credit increased by £55 a month at the start of April (this includes the increase in the cost of living payments people will receive compared to last year). This barely covers the increased cost of groceries (£55), let alone the £135 a month increase in the total cost of living. Meanwhile support for a couple over 25 has gone up by £75 yet their food and energy costs are up £130 compared to last year, and their total cost of living has increased by £210 a month.
The analysis also points towards the fact that two million households (45% of all households in receipt of universal credit) are actually receiving well below these basic levels of support as they face deductions for debts. The average deduction these households face is £62 a month, meaning they fall even further from being able to meet the cost of living.
The government has not given any indication that the cost of living payments will continue into 2024/25. This would mean a dramatic reduction in the basic level of support people receive from social security, pushing them closer to destitution.
Sam Tims, economist at the New Economics Foundation, said:
“Universal credit isn’t benchmarked to what people actually need to make ends meet and so millions are being pushed into financial hardship. Because of this underlying inadequacy, a 10% increase to the support someone receives fails to compensate for a 10% increase in the costs they face, and the gap between the two grows.”
“The basic rate of unemployment support is at its lowest level in real terms since the early 1980s but many people receive a reduced basic rate because of deductions resulting from the five-week wait for a first payment or due to third-party debts. This is forcing people to make sacrifices on essentials like putting food on the table or warming their home.”
Notes
The New Economics Foundation is a charitable think tank. We are wholly independent of political parties and committed to being transparent about how we are funded.
Data presented is rounded to the nearest £5.
The Minimum Income Standard (MIS) is developed by the Centre for Research in Social Policy at Loughborough University, supported by the Joseph Rowntree foundation. More information is available here: https://www.lboro.ac.uk/research/crsp/minimum-income-standard/
In our analysis, comparisons are made to the rates of the MIS that do not include housing and childcare costs, as these are supposed to be covered (in part at least) by additional elements of social security rather than the basic rates of support.
Figures on the proportion of households on Universal Credit subject to deductions, and the average amount of these deductions, are drawn from a recent government response to a parliamentary question on the subject: https://questions-statements.parliament.uk/written-questions/detail/2023 – 05-05/183915
Campaigns Living income
Topics Social security
