Universal Credit ‘will need to change to tackle challenge of long-term sickness’

Universal Credit (UC) will need to change to meet the growing challenges of an older and sicker population, according to a think tank.

The number of benefit claimants who are out of work because of ill health has almost doubled since UC was first introduced, to reach 2.3 million, the Resolution Foundation said.

Both the benefit system and the country have changed significantly since the introduction of UC in 2013, according to the report.

The unemployment rate has fallen from 8.5% in 2011 to 3.8% in 2023, the foundation said.

“Whoever wins the election will be governing a ‘Universal Credit Britain’, as the final stage of what has been the biggest benefit reform in a generation is due to end with a system covering seven million families by 2029,” the report said.

The Government has recently announced changes to UC that are designed to encourage people with ill health to seek work.

Whoever wins the next general election would need to build on these plans, while recognising that UC could not by itself tackle growing sickness problems, according to the foundation, which is focused on improving the living standards for those on low to middle incomes.

By 2028, entitlements to UC would total around £86 billion a year, but this was £14 billion less than if the Government had kept the 2013/14 benefits system, the foundation said.

The report said that seven in 10 (71%) families who were eligible for either UC or legacy benefits were worse off in real terms on UC in 2024/25 than they would have been under the legacy system in 2013/14.

But this was largely due to cuts in overall levels of working-age support, rather than the design of UC itself, the foundation said.

The research indicated that the biggest beneficiaries from the switch to UC were working families in rented accommodation.

A renting single parent who worked 30 hours per week on the national living wage would be nearly £3,800 per year better off in 2024/25 than if they were on the old system, the foundation calculated.

Across the 2.7 million families in the private rental sector that were eligible for UC, the average gain compared to the old system was £1,200.

But the report also said that the streamlining of disability premiums meant that out-of-work claimants with disabilities were likely to be worse off under UC.

A single person with a long-term disability that prevented them from working could end up £2,800 per year worse off, the foundation said.

“Universal Credit also shifted the make-up of support for people with ill health and disability, with the result that disabled people are among the biggest losers, on average, from the reform,” the report said.

“Single people with a disability that prevents them from working – ie those who would previously have been in the Employment and Support Allowance (ESA) support group and in receipt of Personal Independence Payment (Pip) – are around £2,800 per year worse off on Universal Credit in 2024/25 than on legacy benefits once any transitional protection has been eroded or lost.

“This is because the element of Universal Credit covering ill health is set at a lower rate than the combination of ill-health support and disability premiums in ESA.”

Alex Clegg, economist at the Resolution Foundation, said: “Whoever wins the next election will be governing a ‘Universal Credit Britain’, with seven million families eventually receiving the new benefit.

“It is vital that they understand both the system they will inherit and the population that relies on its support.

“A lot has changed since Universal Credit was first introduced back in 2013. The working-age benefit system is less generous, with entitlement down by £14 billion. And while the 2010s’ problem of high unemployment have faded, Britain faces new challenges from an older and sicker population.

“Compared to the old system, Universal Credit offers greater support for renters and stronger incentives to enter work. But its original design did not anticipate there being over two million claimants with poor health or disabilities.

“Alongside efforts from the NHS, education, and labour market policy to address the drivers of ill health, UC will need to change to tackle Britain’s new challenge of long-term sickness.”

A Department for Work and Pensions spokesperson said: “Universal Credit has proven itself as a modern benefits system fit for the future, providing a vital safety net to millions while helping people move into work faster.

“We boosted benefits by 6.7% this month, worth £470 for 5.5 million households on Universal Credit.

“Work is the best path to long-term financial security and through Universal Credit, our £2.5 billion Back to Work Plan will help over a million people – including those with long-term health conditions – find, stay and succeed in work.”

Dan Scorer, head of policy at learning disability charity Mencap said: “Current benefit rates are not enough to cover the extra costs many people with a learning disability face or even their basic essentials.

“Our recent survey showed that people with a learning disability were taking extreme actions to save money, including not turning on lights, skipping meals and not using their heating when cold.”