Policy in Practice’s new analysis on the cost of uprating Universal Credit to tackle the cost of living crisis for The Centre for Social Justice (CSJ) looked at three policy options for Universal Credit that the government could consider.

The Centre for Social Justice asked Policy in Practice to calculate the cost of the following policy options to increasing Universal Credit, in order to protect low-income households from high and rising inflation.

  • Option 1: Restoring the £20 weekly uplift to Universal Credit
  • Option 2: Increasing elements of Universal Credit, as though they had been uprated by 10% in April 2022
  • Option 3: Restoring work allowances to 2015 levels to help all Universal Credit households in work

Read Policy in Practice’s paper: Uprating Universal Credit to tackle the cost of living crisis

Read CSJ’s paper: The Cost of Living: Alleviating the crisis

The need for uprating Universal Credit

The UK is experiencing a cost of living crisis. The cost of living hit a 30 year high in February 2022 with inflation running at 7.8% and outpacing wage growth. One of the major financial pressures on households is the rising cost of energy, following the global pandemic and the embargo on oil and (soon) gas from Russia. Household bills have increased by an average of 54 % since 1 April 2022.

The CSJ’s full report, The Cost of Living: Alleviating the crisis, states that many households, especially those on the lowest incomes who spend the highest percentage of their incomes on energy, are struggling. The report recommends that the Government should increase the amount of money going to the poorest in society and bring down taxation for those in the squeezed middle.

Policy costings

In order to protect low-income households from high and rising inflation our policy analysts calculated the cost of three policy options for increasing Universal Credit.

3 options for UC

Option 1

Restoring the £20 weekly uplift to Universal Credit would see 4.2 million households each gaining up to £1,000. This would cost £4.2 billion.

This was our preferred option as it gets the maximum support to the maximum number of households. We also know from the pandemic that it could be implemented quickly. 

Option 2

Increasing elements of Universal Credit as though they had been uprated at 10% in April 2022 would see 4.2 million households gain an average of £729 a year. This would cost £3.1 billion.

This was our second preferred option. It lowers the cost to the treasury and is a sensible alternative to restoring the £20 uplift. 

Number of households receiving each element of Universal Credit, and the increase if each element had been uprated by 10% in April 2022
Number of households receiving each element of Universal Credit, and the increase if each element had been uprated by 10% in April 2022

Option 3

Restoring work allowances to 2015 levels to help all Universal Credit households in work would see 1.6 million families gain an average of £422 per year. This would cost £733 million.

This was our least preferred option. If the government wants to continue to prioritise support to working people, this is a sensible alternative. However, households who are unable and not expected to work would continue to suffer from high and rising living costs. 

Number of households in work for each household type, an estimate of how many of these households have a UC housing element, and the total cost increase after returning the work allowance to the 2015 levels
Number of households in work for each household type, an estimate of how many of these households have a UC housing element, and the total cost increase after returning the work allowance to the 2015 levels

These policy options could operate independently and be implemented on their own or alongside each other. The costs may increase, as people on legacy benefits migrate across to Universal Credit.

The report recommends that the Government should increase the amount of money going to the poorest in society and bring down taxation for those in the squeezed middle.

The urgency for action will only increase as the energy price cap is expected to rise further to £2,800, more than doubling from £1,277 a year earlier.

Since the end of the £20 emergency uplift to Universal Credit, there has been no directly targeted support to the lowest income households. We believe that the Chancellor should consider each of these options, and implement one or all of them, or propose a better alternative. Doing something is better than doing nothing.

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