The next government should restore the value of benefits to cover the costs of living.
The cost of living is the most important issue for many voters this election. It’s no surprise why. In 2022, nearly 4 million people in the UK experienced destitution, meaning they could not meet their basic physical needs such as having enough to eat and staying warm.
The UK’s social security system is failing in its core purpose to prevent poverty. And yet the Conservatives have promised more crackdowns on welfare, with the prime minister linking this with his pledge to lower taxes.
When the Conservative-Liberal Democrat coalition government came to power in 2010, they inherited a social security system in radically better shape than it is now. What happened?
During the previous Labour governments (1997-2010), 2.4 million people were lifted out of poverty, including 700,000 children. This was done during favourable economic conditions, but was also the result of progressive social security measures such as tax credits and child benefits.
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People received working-age benefit payments for different needs: jobseeker’s allowance, income support for single parents and incapacity benefit for long-term illness and disability. Housing benefit went directly to landlords to cover claimants’ rent.
Enter the global financial crisis. The Conservative-led government’s response was austerity cuts: cutting back on welfare to tackle the budget deficit.
Lowering the value of benefits is the biggest austerity cut to have affected incomes. In 2010, the government switched from uprating the value of benefits each year in line with the retail price index to using a different measure of inflation, the consumer price index, instead. This is usually lower and effectively makes payments worth less.
This was expected to save the government around £6 billion pounds a year. In 2012, the value of benefits was capped to increase at 1% while inflation was forecast at 5.2%.
In 2012, the government introduced a new system of tougher rules and sanctions on people receiving benefits. Conservative politicians said this would end “the ‘something for nothing’ culture”, but the change has had lasting negative effects.
Benefit sanctions were always part of the system, but became extreme in 2012. If, for example, someone misses one Jobcentre appointment their benefit could be reduced or removed for 28 days.
Nearly a quarter of all jobseeker’s allowance claimants were sanctioned between 2010 and 2015. Research shows that sanctions have “profoundly negative outcomes”, including on people’s mental health.
Other cuts to incomes followed the Welfare Reform Act 2012. The “bedroom tax” penalised social housing tenants who had “extra” bedrooms. The idea was to reduce renters’ housing benefit so they would downsize to a smaller home. However long-term housing shortages mean that smaller properties are rarely available.
In 2013, the household benefit cap was introduced to limit the maximum amount a family could receive in benefits payments. It had the most impact on families with children and those with high rents.
Universal credit, introduced in 2013, was billed as the biggest shake-up of benefits in 70 years. It promised to make work pay and simplify the system. It replaced separate tax credit, unemployment, lone parent, disability and housing payments with a single payment.
Research from think tank the Resolution Foundation suggests that universal credit provides more support for working people who rent their homes than the previous system. But disabled people who cannot work are likely to be much worse off than under the old system.
There are other problems with universal credit. Unlike under the previous system that gave housing benefit straight to landlords, claimants have to pay their rent from a pot of money provided by the government that is almost certainly too small to cover all their costs.
The first universal credit payment takes around five weeks to arrive, meaning people may fall into rent arrears. A result is that some landlords take legal action to evict those receiving universal credit.
In 2015, the Conservatives abandoned targets set by Labour to reduce child poverty. Then in 2016, new legislation slashed spending again. Benefits were frozen for four years.
The two-child limit was applied to tax credits and universal credit in 2017 to remove income for third or subsequent children. Large families faced increased poverty as a result.
In 2020, the pandemic hit. Universal credit and tax credits were raised by £20 per week, but this ended in late 2021. The cost of living crisis has since widened the gap between benefits and prices.
Today, the value of universal credit falls £890 per month short of the cost of living for single people over 25. This is because of the changes to uprating and the benefit freeze.
In Feburary 2024, charity the Trussell Trust published research showing that over half of people on universal credit had run out of money for food in the previous month.
The next UK government must make emergency repairs to social security to halt harrowing declines in health and life expectancy. This should ensure a minimum acceptable standard of living, including restoring the value of benefits such as universal credit to cover the costs of living.
Since 71% of children living in poverty are in working families, employers should be required to pay the real living wage. In-work universal credit also needs to top up wages enough to make work pay.
Repairing the social safety net is an enormous challenge, but public support for it has been on the rise for years. In 2010, many people thought benefit claimants didn’t deserve any help. But from 2015 there has been a growing preference to help people receiving benefits.
Sharon Wright has previously received funding from the Economic and Social Research Council, Joseph Rowntree Foundation and the Health Foundation.
