Benefit levels in the UK: Policy in Practice’s evidence to the Work and Pensions Committee

Deven Ghelani, Director of Policy in Practice, was asked to give evidence to the Work and Pensions Select Committee about benefit levels in the UK earlier this week. He gave evidence alongside the former Secretary of State for Work and Pensions, Sir Iain Duncan Smith, MP for Chingford and Woodford Green.

You can watch the evidence session here, or read the written evidence here. This post summarises the key points from the session.

1. Benefit levels are 7.5% lower in real terms than they were a decade ago

The real value of benefits from 2010 to 2022 (orange), compared to the value if it were uprated by inflation (green)

Policy in Practice analysis of House of Commons data on benefit uprating, ONS data on CPI inflation available.

Our analysis suggests that current working-age benefit rates are insufficient to meet essentials, with one in six households on working age benefits facing a shortfall from month to month.

In April 2023, 28% of low-income households did not have sufficient income to meet costs. This rose to 39% amongst certain cohorts. The share of households that are not able to meet costs might also be at risk of destitution.

2. Benefit levels are a government responsibility, set by the Treasury

The Select Committee should broaden the inquiry on UK benefit levels to include the Prime Minister and Chancellor. The Treasury sets how much money the country spends on social security benefits. The DWP works within the budget it set. Further inquiries on benefit levels should include those with the decision power to increase welfare spending.

The government has access to a significant amount of high quality advice on benefit levels and their impact, for example the Social Metrics Commission or JRFs Essentials Guarantee. We don’t therefore believe that there is a need to establish an independent committee to make recommendations on benefit levels. Instead, the enquiry should focus on improving existing accountability mechanisms.

3. Universal Credit is a more responsive mechanism to set benefit levels and should be used to better target support

During the pandemic Universal Credit showed that it can be a much more responsive system than legacy benefits. Once it is fully rolled out, with current tax credit and ESA recipients on the new system, it will enable benefit levels to more flexibly respond to inflation or other economic shocks.

Iain Duncan Smith argued that Universal Credit was always intended to be accompanied by Universal Support. Universal Credit data highlights the difficulties a household is facing, whilst Universal Support would help target proactive support to people needing more than financial assistance to improve their circumstances.

“What we were not able to do with the benefit system was to understand what the situation was for families and households… it disguises what is going on behind it. Understanding that now gives you a tool to be able to have some effect on lives rather than income, helping those at the bottom end much more, and targeting what you do to change lives.
Rt Hon Ian Duncan Smith

Deven argued for Universal Credit data to be used to proactively widen access to support and evaluate the impact of interventions. Councils already use this data to proactively target support to those who need it most.

Our LIFT analytics platform is used by over sixty local authorities to unlock access to around £1 billion of support each year. We argue that similar approaches should be applied at scale across government.

“UC offers an incredible backbone to better target this support. We work with local government to better target support, using Universal Credit data more effectively across government can make sure support is proactively targeted to those who need it the most.
Deven Ghelani, Director of Policy in Practice