The gap between universal credit and the cost of living is growing

No matter what we do for a living or where we live, we all want pretty similar things: a warm home, knowing that our family and friends are safe, and the assurance that we will be able to cope with whatever life has in store. But right now, for too many of us, this is out of reach. 

The UK’s weak income safety net is forcing millions into impossible choices over whether they put food on the table or heat their home. Our analysis shows that 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. The underlying inadequacy of support means that the 10.1% April 2023 inflation-increase to universal credit and cost of living payments fails to compensate for a 10% increase in the costs people face, and so the gap between the two grows. This shortfall has increased by £80 a month since last April and the gap for couples over 25 has increased by £140 to £1,550 a month. 

To measure the cost of living, we use the minimum income standard (MIS) as calculated by Loughborough University’s Centre for Research in Social Policy. Household budgets for different family types are calculated based on what the public thinks is needed for an acceptable standard of living. 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.

We found that 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.

This analysis analysis assumes all three cost of living payments are received, if not the situation is much worse. 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, meaning they would fall even further from being able to meet the cost of living.

The basic rate of unemployment support at its lowest level in real terms since the early 1980s but on top of this, 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. The average deduction these households face is £62 a month, pushing them closer to destitution.

We need a bold new way of providing income support that will help all people deal with the challenges presented by the fast-changing world we’re living in. A national Living Income would set an income floor that is enough to meet life’s essentials, which no one can fall below whether they are in or out of work.

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