Universal Credit and School Meals

The introduction of Universal Credit means that the current system for administering school meals will have to change.   Extending entitlement to Free School Meals under Universal Credit will be essential to making work pay.

The following briefing note was produced for the APPG on School Food on April 25th.

Extending eligibility for Free School Meals will support the government’s welfare reform proposals to make work pay at all levels of income and ensure that all children growing up in an out of work household are guaranteed at least one healthy meal every school day.

The government is undertaking a fundamental overhaul of the welfare system with the introduction of Universal Credit, to ease the transition into work and make work pay.  As a result of the introduction of Universal Credit, the eligibility criteria for FSM will have to change substantially.  Key benefits which determine whether a family is entitled to FSM will be rolled into a single payment and there will be no point at which the loss of FSM is covered by a sharp increase in other benefits.

The table below, produced by the Centre for Social Justice for the Social Security Advisory Committee shows the rise in gross income required to compensate for suddenly losing free school meals.

  • A household would need to earn an additional £1,527.92 per child (Gross income) to compensate for the sudden withdrawal of Free School Meals under Universal Credit.
  • A household no longer receiving Universal Credit would only need to earn an additional £539.  The disincentive is greater for households with more children.

universal-credit-free-school-meals-cliff-edge

A sudden withdrawal of Free School Meals would hit 200,000 families, replicating the policy failings of the Government’s initial proposals on Child Benefit and seriously put at risk the government’s welfare reform proposals to make work pay.  Introducing a new benefit cliff edge could make millions of low income families worse off for earning more.

There is a way to tackle this problem, by extending eligibility for school meals to all households on Universal Credit.

Under this proposal:

  • Children in out of work households would continue to receive free school meals.
  • Working families would be asked to contribute a fixed amount of £8.66 per week per child for their school meal.  School meals cost around £10 per week, but often offer better value than an equivalent shop-bought meal.
  • The household contribution would be administered by lowering the ‘Earnings Disregard’, (the amount a family can earn before Universal Credit is withdrawn) for families on Universal Credit opting into the School Meals.

This proposal would give millions of low income households’ access to a subsidised school meal, at a relatively low cost to the taxpayer, as little as £100m.

Families would make a cost-neutral choice between a packed lunch and a school meal.  Alternative options that offer a greater subsidy for households in work would cost more.  These proposals overcome the issue of work incentives under Universal Credit at a relatively low cost.

It is better to give children an option to choose between a school meal or a packed lunch.  We know that takeup of free school meals varies, and children are less likely to choose school meals as they grow older and become more independent.

The case for a greater subsidy would have to be based on

a)    The need for additional support for low income households above and beyond that provided by Universal Credit

b)    Evidence clearly showing the impact on takeup of school meals

c)    Evidence showing the knock on impact on better childhood nutrition and healthy eating in later life when compared with packed lunches.

Options for greater subsidy include capping the household contribution at three children, or giving primary school children a greater subsidy than secondary school children.  Younger children are more likely to choose a school meal.

The benefits of healthy food to low income families are well recognised by teachers, and parents.  Free and subsidised school meals provide often vital financial support for low income families and have important health and educational benefits for the children that receive them.

Key Figures (based on analysis by the Children’s society):

  • Extending eligibility for Free School Meals to all children in Universal Credit households would reach an additional 1.3m households (1.9m children in total) and cost £500m
  • However, the cost could be substantially reduced by using the earnings disregard mechanism within UC as a way to get working households to contribute to their FSM
  • Reducing the household disregard by £10 per week child would mean the households in work could contribute £8.66 per week to a school meal worth £10.  The cost would fall to around £100m.
  • Reducing the household disregard by £5 per week child would mean the households in work could contribute £4.33 per school week for a meal worth £10, the cost would fall to £290m

Work incentives remain high using this mechanism.  Parents would contribute by agreeing to have their Universal Credit withdrawn earlier, a small reduction in their participation tax rate but still significantly higher than under the current system.

As an alternative, the Social Security Advisory Committee have raised the possibility of a ‘run on’ of up to three terms for households losing Free School Meal entitlement.  This means that households facing a cliff edge would have up to one year to increase their earnings to compensate for losing Free School Meals.

I would support the introduction of a run-on for families no longer receiving Universal Credit, to reduce the impact of introducing a cliff edge at higher incomes – though this would incur an additional cost to the DfE.

Conclusion

Extending entitlement to Free or subsidised school meals is essential to support work incentives for out of work and in work households.

Extending eligibility would add to the cost of providing school meals, but asking working families to contribute to the cost of a subsidised school meal would help to control the cost of the policy.  Extended entitlement could be delivered at a cost of around £100m.

This could be considered affordable and cost effective even under current spending constraints, particularly if the government recognise the health and educational benefits of School Meals.

– End–

Please note that this briefing note was produced for the APPG on School Food and has not been published.  The analysis in this paper is based on independent analysis, but the policy costings are based on analysis by the Children’s society ‘Fair and Square Campaign’.

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