Drawing on the findings of a qualitative research study exploring the experience of working claimants on Universal Credit (UC), this new policy report by Dr Rita Griffiths and Dr Marsha Wood explores the interaction between earnings, ‘passported’ benefits and other means-tested support.
The research found that, while all participants had levels of earnings low enough to entitle them to UC, only in rare instances did UC receipt, of itself, automatically qualify them for help. Not only were application processes typically onerous and time-consuming, but many working claimants were ineligible for support due to the very low earnings thresholds which applied to most of the schemes. Others had variable earnings which meant they dipped in and out of eligibility from one month to the next. Those whose earnings rose above a certain level could find themselves financially worse off, undermining UC’s fundamental goal to ‘make work pay’. This was because the extra take home pay was often worth less than the value of the entitlements lost. These ‘cliff edges’ discouraged some people from working longer hours and earning more.
A key recommendation is for a comprehensive review to be conducted of the additional means-tested benefits, schemes and discounts that sit outside Universal Credit, exploring their interaction with earnings and their effects on work incentives and employment behaviours. This should be included as part of the review into UC and the Government’s new child poverty strategy.
The report is accompanied by a policy brief summarising the key findings and recommendations.
The research was funded by abrdn Financial Fairness Trust.