Through last Wednesday’s budget, the Chancellor announced two significant changes to welfare benefits which will help to improve the take home pay of workers on low incomes. Reducing the rate at which UC payments are reduced as claimants move in to work from 63% to 55% will mean all workers on UC are better off. In addition, some single parents and disabled workers will keep more of their UC as they start earning as a result of the increase to work allowances.

These are sensible measures, and present crucial steps in supporting individuals to enter and stay in work. But with the removal of the £20 uplift introduced at the start of the pandemic, their impact will be limited. The UK’s social security system is among the least generous of all OECD countries. It’s essential that we learn from the response to the pandemic and improve our safety net. Alongside increasing rates, this blog outlines a series of reforms that would make Universal Credit work better for working people.

Enabling people on UC to access a wider range of training and support

Individuals within intensive work search group of Universal Credit are required to spend the equivalent of a full working week preparing for work and applying for jobs. This prevents them from being able to take part in training courses that might allow them to move closer to roles they are interested in and that would enable them to increase their earnings. This currently affects 1.9 million people on UC (as at August 2021).

Recognising this issue, Government recently introduced Train and Progress which will allow some people on UC to access short courses running for up to three months. This is a positive step, but evidence about the extent to which these short courses lead to better job outcomes is still limited, and there would be value in opening up a wider range of training opportunities to ensure that individuals who are unemployed have access to training that aligns with their preferences and needs.

Extending work allowances

The original design of Universal Credit included a work allowance for all claimants, ensuring that individuals receiving UC would continue to receive financial support as they move in to work. This would significantly increase take-home pay, and would be particularly beneficial for workers on low incomes who need to work part-time.

Offering advance grants and flexibility in the frequency of payments

Universal credit should provide a safety net for individuals experiencing insecurity. Greater flexibility over assessment periods and the frequency of UC payments would support workers whose earnings vary, including those on temporary contracts, contracts without guaranteed hours, or those working overtime.

Improving support with childcare costs

Working families can receive some support to meet childcare costs through their UC payments. However, this is limited to 85% of the total costs, and costs must be paid upfront by parents before being reimbursed within their UC payment the following month.

Analysis from Coram has indicated that in 99% of local areas across the country the average price of a full-time nursery place for a child under two is higher than the maximum costs supported through Universal Credit.

The Government has underlined its ambition to reduce in-work poverty. But to deliver on that goal, it must tackle issues within the benefits system that make it harder for people on low incomes to enter, stay and progress in work.

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