Written evidence from The Centre for Research in Social Policy to Work BPI0036

Introduction

The Centre for Research in Social Policy, Loughborough University, undertakes a range of research relating to income adequacy across the life course. Much of this work is rooted in our long-standing research, funded by the Joseph Rowntree Foundation, establishing public consensus about what is needed in order to have a minimum socially acceptable standard of living in the UK today[1]. The Minimum Income Standard (MIS) programme of research has, since 2008, set out what the public agree everyone needs in order to live in dignity in the UK – this is about meeting material needs but also about being able to participate in society. MIS establishes a benchmark against which the adequacy/inadequacy of social security benefits, wages and household incomes[2] can be assessed.

The evidence included here draws on MIS research over time and crucially on a recent study exploring the impact of low income and the social security system, particularly the low Universal Credit rate for under 25s, on young peoples’ living standards and opportunities to transition out of homelessness, commissioned by St Basils and funded by the West Midlands and Combined Authority[3]. We focus here on evidence about the adequacy of social security benefits.

Adequacy of benefits 

What ‘essentials’ should working-age benefits in the UK cover?

Our work on a Minimum Income Standard in the UK sets out what the public agree is needed to live with dignity in the UK today – it details a publicly defined, minimum socially acceptable standard of living that everyone in the UK should be able to reach. It’s definition highlights what the public see as essential.

A minimum standard of living in the UK today includes, but is more than just, food, clothes and shelter. It is about having what you need in order to have the opportunities and choices necessary to participate in society.

This public agreement about essentials goes beyond survival, emphasising the importance of being able to participate in the world around you, to not feel excluded, to belong. It speaks to a shared understanding of the kind of society we want, and the resources people need to play their part of this. Working-age benefits should enable people to eat, have a roof over their head and clothe themselves, but much more than this they should support people to participate in society.

Aligning working-age benefits with what is required to reach MIS would mean a significant increase in benefit levels, which particularly at the moment would be politically and economically challenging. However that does not mean that benefit levels should be set without reference to regularly updated evidence, such as MIS, or that they should not reflect what the public agree is needed to live in dignity. This includes things like access to the internet[4], transport costs, activities outside the home for children and adults. There is substantial value in being able to point to a basis for decision making about levels of benefits in a similar way to the authority of the Real Living Wage which is also underpinned by MIS.

Are current working-age benefit levels sufficient to cover those needs? 

Our ongoing MIS research identifies the growing gap between what is provided by safety-net benefits for those out of work and what is needed to live with dignity in the UK today.

• Our research on minimum acceptable living standards provides an annually updated benchmark, rooted in public consensus about what the public agree is needed to live with dignity in the UK.
• Through annual MIS updates, it is possible to track the adequacy of out-of-work benefits relative to this publicly defined threshold over time.
• The safety-net provided by our social security system has been eroded over the past decade, and many households who rely on this support face significant challenges in meeting their minimum needs in 2022.
• The adequacy of out-of-work, ‘safety-net’ social security benefits, relative to what the public agree is needed for a minimum standard of living, has in general declined between 2008 and 2022.
• Table 1 shows what has happened to the adequacy of out-of-work benefits relative to MIS over time for selected households and years.
• Households with children have a higher proportion of a minimum budget met by benefits, but even including the cost of living payments, the percentage covered has fallen from 68% in 2008 for a lone parent with two children (aged 2-4 and 5-11) to 54% in 2022.
• For a working-age couple, including the cost of living payment, out-of-work benefit provided only 29% of a minimum budget in 2022; without the cost of living support, this falls to around a quarter of a minimum.

Table 1: The percentage of the Minimum Income Standard covered by out-of-work, social security benefits 2008–2022

Our research with young people points to the inadequacy of the lower Universal Credit (UC) rate for those under the age of 25.

• Benefit rates are substantially lower for those under the age of 25 – Universal Credit is £292.11 a month for this age group compared to £368.74 for those aged 25 and over. The under-25 rate is equivalent to just over £67 a week, which is less than a quarter of the £293.28 a week that a single person requires as a minimum, excluding rent, according to the Minimum Income Standard (MIS) - indeed the entire £67 allocated to a single person on Universal Credit, only just reaches MIS food budget of £65.73 a week[5].
• The Universal Credit under 25 rate (and with even less money if they face deductions), can mean living below destitution level[6].
• If young people under 25, living independently, are renting in the Private Rental Sector it is likely that the housing element of UC won’t cover the full cost of rent, further eating into the already low UC payment.
• There is a risk that the low Universal Credit rate, coupled with escalating housing costs, inhibits young people’s options and for some having to stay in unsatisfactory home or other vulnerable situations if they cannot afford to live independently.
• If young people have received an advance, this will be deducted, reducing the amount of UC received and further decreasing the adequacy of support. This situation is far more likely for young people in low income households who are far less likely to have any savings or financial support from parents to see them through the initial five-week wait.
• Our research highlights the impacts of the inadequate level of UC for young people under 25. Young people were left with little choice in spending, having to prioritise and make sacrifices – ‘surviving’ rather than ‘living’. Even where highly organised and disciplined with their budgets, their money could only stretch so far, resulting in the use of foodbanks or simply having to go without.  The situation will have escalated since this  research took place last year as the rising costs of living have become even more acute.
• The constant worry and stress of trying to manage on such a low income could be emotionally draining, alongside a feeling of missing out and being unable to do things that other young people their age could. Managing on Universal Credit alone meant focussing on getting by on a day to day basis, and limited the possibility of trying to save for the future.

What lessons can be learned in respect of benefits provision more generally from the £20 uplift to Universal Credit, introduced during the pandemic? 

• Table 1 above shows that the £20 uplift had a significant positive impact on the adequacy of safety-net benefits relative to the Minimum Income Standard.
• The £20 a week uplift to Universal Credit demonstrated the difference an additional amount (not far off the under/over 25 Universal Credit difference) made to young people during that time. Young people in our research said how it had helped them to cover essential costs with less stress and pressure, to do things that were beneficial for their well-being that they wouldn’t have been able to otherwise, like meeting up with friends.
• The withdrawal of the UC uplift left a massive gap in their budgets, was a shock for those who had started claiming Universal Credit during this period, and could be a tipping point for those struggling to keep their heads above water.

Accessibility and Administration 

Are there any particular groups who have been ‘left-behind’ in the design of working-age benefits policy? 

Under 25s who live independently. Our research highlights the inadequacy and inequity of the lower Universal Credit rate for under 25s. Paying a lower rate for under 25s implies that they need less money to live on and/or an expectation that young people are living with parents who are able to support them. However, these assumptions neglect the situation of young people who do not have such fall back, who are living independently and face the same living costs regardless of age.  This includes young people who have experienced or been at risk of homelessness, care experienced young people, and those who do not necessarily have a secure, safe or suitable home environment.

The increased costs associated with living away from the family home are not impacted by age, but rather depend on someone’s housing situation, and the costs that they are having to cover.

• Universal Credit is £76.63 a month less for someone under 25 compared to someone who is 25 or over, and affects parents who are under 25 too.
• Young people living independently in our research could not understand why they received less Universal Credit simply because of their age when their needs were the same whether under or over age 25.
• They face the same costs of living. There don’t pay less for rent, energy bills, internet, children’s costs, simply because they are under 25, and they do not eat less! They felt penalised by the system because of their age.
• In reality this means that potentially vulnerable young people are put under greater pressure when they are arguably in need of greater support, struggling to cover essentials, vulnerable to debt and unable to engage in social activities that are important to well-being and mental health – ‘missing out’, having to ‘survive’ rather than ‘live’ as a young person.
• £76 a month could make a huge difference to a young person trying to manage independently, for example was around what some participants spent on food, or would cover internet / mobile costs
• Young people living independently without family support will have less resources to help tide them over the five week wait for Universal Credit, and will be reliant on the advance. However, the resulting repayments further reduce their Universal Credit payments. 
• Under 25s are the age group most likely to experience sanctions. Participants in our research had faced sanctions because of missed appointments linked to not having the money to get there. This further disadvantages young people already facing a lower rate of Universal Credit, pushing them into greater financial difficulty, having to borrow money, applying for emergency payments (which will reduce future UC payments), and using food banks.

For more information

We would be very happy to provide more evidence from our ongoing Minimum Income Standard research or to discuss any of the points made above in greater detail.

May 2023