Written evidence from the Joseph Rowntree Foundation and the Trussell Trust BPI0062

Introduction to the Joseph Rowntree Foundation (‘JRF’) and the Trussell Trust

1. The Joseph Rowntree Foundation (‘JRF’) and the Trussell Trust are making this joint written submission because we share similar concerns, arising from our range of research and frontline experience, that current working-age benefit levels are insufficient for many people to cover even essentials, like food, utilities or other vital household items. We also share a joint vision and proposal for how Universal Credit can be reformed to ensure we can all at least afford the essentials in hard times: the Essentials Guarantee.
2. The Joseph Rowntree Foundation is an independent social change organisation working to solve UK poverty. Through research, policy, collaboration and practical solutions, we aim to inspire action and change that will create a prosperous UK without poverty. We are working with private, public and voluntary sectors, and people with lived experience of poverty, to loosen poverty’s grip on people who are struggling to get by.
3. The Trussell Trust is a network of more than 1,300 local food bank centres across the UK, providing practical support for people who don’t have enough money for the things we all need in life. We believe that it’s not right that anyone needs a food bank in the first place – and that we can change this by ensuring everyone has enough income for the essentials. That’s why we also work with communities across the UK to change the things that are leaving people without enough money for the essentials, bringing together experiences, data, insight and evidence from food banks and the people who need them across England, Scotland, Wales and Northern Ireland. Together with thousands of volunteers and people who have used food banks across the UK, we share what we know to push for the changes that will ensure all of us have enough money to cover the essentials.

Summary of submission

4. Our evidence, research and frontline experiences are all pointing clearly to the fact that social security benefits are falling well short of playing their role as an adequate safety net when people face setbacks or challenges in life. Food bank need is at its highest ever level and 90% of low-income households on Universal Credit are going without essentials.
5. Our recent research indicates that a single adult needs at least around £120 per week to cover essentials, like food, utilities, vital household items and travel (excluding rent and council tax). But Universal Credit’s standard allowance is only £85 per week for a single adult aged 25 or over - a shortfall of at least £35 per week.
6. As importantly, almost half of households see their Universal Credit reduced by various deductions, so receive significantly less than the headline rates. 45% of households on Universal Credit are experiencing at least one deduction to repay debts, largely to central Government, often at unaffordable rates that wouldn’t be acceptable in the private sector. The benefit cap policy also results in deductions from already insufficient headline rates for 112,000 households.
7. Our evidence shows that sanctions drive destitution and food bank need, even whilst the broader evidence suggests they are not effective at moving people into sustainable, quality jobs.  
8. It is not surprising that we see this shortfall in benefit adequacy when levels are not – nor have ever been – based on a rational assessment of what people need to survive, or how much those things cost. The Government has argued that: “There is no objective way of deciding what an adequate level of benefit should be as every person has different requirements.” But - whilst it is true in the strictest sense that deciding on benefit rates includes (like most areas of policymaking) inherently subjective perspectives, judgements and estimates - we robustly challenge the implication that a more logical, evidence-based system is simply impossible.
9. On the contrary, our recent research provides a clear and rational alternative. We recommend that the Government should implement an Essentials Guarantee, a significant and widely-supported reform of social security, which would embed for the first time a protected, minimum level of support linked to the cost of essentials. It would enshrine in legislation: an independent process to regularly determine an Essentials Guarantee level based on the cost of essentials; that Universal Credit’s standard allowance must at least be set at this level; and that deductions from Universal Credit can never pull support below this level.
10. Our Essentials Guarantee proposal contains a role for an independent process to regularly recommend a minimum level of support based on independent evidence. Not only would this improve Parliament’s ability to effectively scrutinise benefit levels, but it would ensure our basic safety net remains fit for purpose in the future, and correct the current situation whereby benefits are not set according to any logical basis, which has allowed the basic rate of Universal Credit to erode over time and be completely detached from people’s needs or the cost of essentials.
11. We can also see examples in other countries that have used a more rational basis for setting benefits. For example, Japan, Canada and New Zealand have benefits that are more clearly linked to an intended purpose of at least ensuring basic living costs are covered and with values more closely related to these costs.
12. Social security should play a range of roles. What is important is for Government to be clear about the objectives of its benefits policy and about the primary purpose of particular benefits. We find clear public consensus that a primary purpose of Universal Credit’s basic rate is to, at a minimum, provide a reliable safety that ensures that if we face setbacks or difficult circumstances we can always at least afford essentials for the adults in a household.
13. The £20 uplift to Universal Credit during the pandemic demonstrated the power of social security policy to make a significant difference to people’s lives. Unfortunately, we also see the negative impact of the temporary nature of the uplift, as we do with the Government’s recent Cost of Living Payments: significant short-term relief, but without secure increases in regular incomes the impact wears off quickly and leaves people feeling insecure and unable to plan.
14. Universal Credit was designed to ensure that people are always financially better off working more, and our evidence of how far short the basic rate of Universal Credit is from being enough to even afford essentials suggests we are a long way from potential work incentive problems being a significant concern. In fact we often see that being unable to afford food or bills and being under constant mental strain makes job hunting or progression harder.
15. Broader reforms would still be needed alongside an Essentials Guarantee, for example to address high housing costs that are causing significant pressure on the adequacy of Universal Credit. In the immediate term, this means we recommend the Government urgently reconnect Local Housing Allowance (LHA) with the actual cost of rent, at least relinking it to the 30th percentile of local rents.

Overview of the Essentials Guarantee and the need for benefit reform to ensure we can all afford the essentials in hard times

16. Between April 2022 and March 2023, nearly three million emergency food parcels were distributed by food banks in the Trussell Trust network - the highest ever levels of need.[1] Inadequate social security is the main driver of this food bank need. Without an adequate safety net, a setback can be hard to overcome. Poverty comes at a significant cost to individuals, but also to the economy and wider society, with downstream costs to public services like the NHS.
17. Our broader recent research shows that:[2]

a)      90% of low-income households on Universal Credit are currently going without essentials, such as food, a warm home, adequate clothing or toiletries.

b)      Support has eroded over decades and the basic rate of Universal Credit – its standard allowance (or equivalents in previous systems) - is now at its lowest level in real terms in almost 40 years (CPI-adjusted) and its lowest ever level as a proportion of average earnings.

c)       66% of the public think the basic rate of Universal Credit is too low.

d)      Almost half of households see their Universal Credit payments reduced by various deductions. For example, a household can lose up to 25% of their standard allowance to repay debts to central government.

18. Our research suggests that, in 2023/24, a single adult needs at least around £120 per week to cover essentials, like food, utilities, vital household items and travel (excluding rent and council tax). But Universal Credit’s standard allowance is currently only £85 per week for a single adult aged 25 or over - a shortfall of at least £35 per week. In addition, direct deductions from Universal Credit often pull people’s actual support well below this headline rate. Paragraphs 31 to 40 explain the research in more detail and show equivalent figures for couple households.
19. Recommendation: The Government should implement an Essentials Guarantee. This would embed in our social security system the widely supported principle that, at a minimum, Universal Credit should protect people from going without essentials. Developed in line with public attitude insights and focus groups, this policy would enshrine in legislation:

a)      An independent process to regularly determine the Essentials Guarantee level, based on the cost of essentials (such as food, utilities, vital household items and travel) for the adults in a household (excluding rent and council tax). The independent process would draw on independent evidence, including from people with direct experience of living on a low income. Ultimately this level should be recommended via the independent process, but our research indicates the kind of level this would likely have to be in 2023/24, as set out in the table in paragraph 35.

b)      That Universal Credit’s standard allowance must at least meet this guaranteed level.

c)       That deductions from Universal Credit (such as debt repayments to government, or as a result of the benefit cap) can never pull support below this guaranteed level.

20. More details of this policy proposal, its modelled impacts and research methodology can be found in An Essentials Guarantee: Technical Report.[3]
21. Implementing the Essentials Guarantee would represent a significant and widely supported reform of social security, embedding for the first time a protected, minimum level of support linked to the cost of essentials. But broader benefit reforms would still be necessary. For example, the Essentials Guarantee does not focus on rent or council tax because these costs are meant to be covered by other benefit elements. However, high housing costs is a major factor leaving many people without enough money to afford essentials, particularly people living in the private rented sector.
22. Many private renters are having to use their standard allowance (or other elements of social security income) to cover a shortfall between their housing support (‘Local Housing Allowance’ or LHA) and their rent. LHA limits support to the cheapest 30% of rents in a local area, but an ongoing LHA freeze means it is still based on rent levels from 2018 to 2019. Meanwhile, on average across England (excluding London), asking rents have increased by 25% since then.[4]
23. This is causing significant pressure for households and dragging down the overall adequacy of Universal Credit. Research by Crisis finds that shortfalls between housing benefit and actual rents have increased by more than 40% in five months on average, and that just 11% of one-bedroom properties across England are now affordable to people in receipt of housing benefit, down from 17% in April 2022.[5]
24. Recommendation: The Government must urgently reconnect LHA with the actual cost of rent. This means, in the immediate-term, at least relinking it to the 30th percentile of local rents.
25. The rest of our submission directly addresses some of the Committee’s specific questions, expanding on details of our evidence and proposal outlined above where relevant.

What ‘essentials’ should working-age benefits in the UK cover? Are current working-age benefit levels sufficient to cover those needs?

26. The Government’s current response to questions about the sufficiency of benefits has generally been to argue that: “There is no objective way of deciding what an adequate level of benefit should be as every person has different requirements.”[6]
27. It is of course true in the strictest sense that there is no absolutely objective way to determine benefit rates. It is a decision that includes inherently subjective elements, such as different perspectives on the purpose of a benefit and what standard of living it should allow, judgements associated with methodologies, imperfect data, or how to address variability in individual needs and circumstances. However, this is true of many policy decisions that are taken every day. It is wrong to suggest that benefits levels should therefore be set completely arbitrarily, as they generally are now, with no reference to a stated purpose, evidence of need or external data. It is perfectly possible to set benefits on a much more rational basis than currently, with reference to independent evidence and data.
28. Instead, most of our current benefit rates are not really based on anything rational. During the creation of the modern welfare state, Beveridge proposed some figures based on what would be needed to cover basic costs, but the levels set in 1948 were ultimately a political compromise. Since then, benefit rates were not uprated on a regular basis until 1975, after which governments reviewed whether to increase them by inflation (and if so, using which rate) or not (sometimes not, for example with the recent four-year freeze).
29. Some benefits are already set on a more rational basis. For example, LHA is linked to data on the cheapest rent levels, although as discussed in paragraphs 22 to 24, LHA is currently facing an ongoing freeze in cash terms, despite soaring rents.
30. Overall, though, the main benefit rates are based on nothing other than being simply the end result of a historical sequence over decades of successive rate changes, based on inflation (and a choice of which inflation measure is used), freezes or caps, welfare reforms, or political assessments of affordability. They are not set according to any rational assessment of need or reference to living costs expected to be covered, or indeed to any other benchmark.
31. Whilst there will be a range of perspectives and judgements on the right level of benefits, our recent research provides a clear route towards introducing a rational, evidence-based and consensus-based approach to determine a minimum amount for the core building block of support for every household receiving Universal Credit – its standard allowance.[7]
32. There are of course other elements of the benefit system intended to cover other costs specifically, such as rent or council tax, or extra allowances associated with being disabled, or support for children. These other elements aren’t covered by this research, the objective of which was to focus clearly on what the standard allowance is for.
33. The proposal starts from the premise that Universal Credit’s standard allowance is the basic minimum safety net level in our social security system and foundation stone for all other elements of Universal Credit, a primary purpose of which is to ensure that the adults in a household can at least afford basic essential living costs (like food, utility bills, other core household items and travel) while they recover from setbacks. Our focus groups and polling found strong public consensus for this principle.
34. We then find an indicative level for this minimum, based on what the public strongly agrees is essential for this basic rate of benefit to cover at a minimum. It recognises that there will inherently be variations in need according to individual circumstances or geography, and that judgement is involved in determining what is deemed essential and how much is needed to be able to afford these essentials. It also errs towards the more stringent and conservative end of the spectrum of items and costs allowed. To do this:

a)      We drew on existing research on what items the public consider to be basic essentials as guidance to help draw up an initial list of categories likely to garner strong public support as being essential for Universal Credit to cover.[8]

b)      We estimated the costs of these categories, primarily based on average spend by single and couple adults without children in the second and third deciles of equivalised household income, using household spending data from the Office for National Statistics’ (ONS) Living Costs and Food Survey (LCFS) for 2019/20, uprated to December 2022 price levels using the most relevant components of CPI. This part of the income distribution was used so as to base the estimates on actual spending patterns of lower income households, but avoiding data from the bottom decile where data quality is lower and where we expect many households will not be spending enough to meet their needs. Some categories used alternative bases where that was more appropriate. For example, a lower amount solely for phone and internet costs was used from JRF’s Minimum Income Standards[9] research because it was not possible in the LCFS to isolate these from broader packages that might include TV subscriptions (which are excluded from our indicative level). Another example is travel costs, which we based solely on four days of bus travel per week per person priced at the national bus fare cap level.

c)       We tested these categories, costs and the overall amount, by running focus groups with the public, including with people receiving Universal Credit, workshops with food banks in the Trussell Trust network, and representative polling of the general public, adapting the amounts based on feedback received.

35. Full details of methodology and categories can be found in An Essentials Guarantee: Technical Report.[10] However, in summary, there is strong public consensus that Universal Credit’s standard allowance should at a minimum at least be enough to afford the following basic essentials, totalling at least around £120 a week for a single adult and £200 for a couple:

36. Comparing these totals to the actual rate of Universal Credit’s standard allowance for 2023/24 of £85 per week for a single adult and £134 per week for a couple (for those aged 25 or over) demonstrates that the current standard allowance rate is clearly insufficient to cover these essential needs: it falls at least £35 per week short for a single adult and £66 per week short for a couple. The gap is even greater for adults under the age of 25, who receive lower standard allowance rates: £53 per week short for a single adult and £94 per week short for a couple.
37. To address this gap, and provide lasting reform that embeds in our system the widely supported principle that, at a minimum, Universal Credit should enable people to at least afford essentials, we propose the Essentials Guarantee, described in paragraph 19.
38. Our final public polling confirmed strong public support for the Essentials Guarantee policy at our indicative level: When presented with the policy, including what the current rates of support are and what they would increase to, 72% of the public supported it and only 8% opposed it. This support was also broad: Labour, Liberal Democrat and SNP voters all showed support around the 80% level, and 62% of Conservative voters supported it.[11] 
39. To reiterate, whilst there will be a range of perspectives on different levels of benefit adequacy, there is strong public consensus that the basic rate of Universal Credit should, at a minimum, at least be enough to afford basic essentials (including the categories of essentials shown in the table in paragraph 35), and that this would need to be at least around £120 a week for a single adult and £200 for a couple in 2023/24. Our Essentials Guarantee proposes a rate that support should never be below, rather than saying ‘this is an adequate level’.
40. Reflecting this, our public polling indicated that significant proportions of the public think that the amount needed to afford essentials is even higher than our indicative levels: out of everyone asked, including people who responded ‘don’t know’, 80% thought that a single person without children would need at least £85 per week to cover essentials; 70% thought that over £120 per week would be needed; 59% thought that over £150 per week would be needed; 44% thought that over £200 per week would be needed; and 29% thought that over £250 would be needed.

Are working-age benefit levels appropriately set to encourage people who are able to work into work?

41. The design of benefits, how they interact with each other, the surrounding support services, broader infrastructure and labour market features are as important as simply the level of benefits, if not more so, for enabling people to work.[12] Universal Credit was designed to ensure that people are always financially better off in work and by taking on more work. Its structure as a combined out-of-work safety net benefit and in-work credit seeks to achieve this, with integrated work allowances and smooth taper rate as earnings rise.   
42. Having said that, there are valid concerns that if out-of-work benefit levels are too high they might theoretically discourage work. However, our evidence of how far short the basic rate of Universal Credit is from being enough to even afford basic essentials suggests we are a long way from that being a significant concern. In fact, we often see the opposite: being unable to afford food or bills and being under constant mental strain – with risk of eviction and fear about providing for your children – makes job hunting much harder. Not having enough to cover the bus ticket to an interview or a shift can make finding and keeping work near impossible, as this 60 year old man told us: “They want you to do jobs, but they expect you to get there when you ain’t got no money. Then they offered me a job the other day, £10.50 an hour for two hours. It’d cost me £8 a day on the bus to get there and back. I ain’t got the money to get there and back.”[13]
43. The UK also has some of the lowest income replacement rates amongst OECD countries. This means people experiencing sudden setbacks will find themselves in the incredibly difficult situation of being unable to pay rent or meet mortgage repayments and getting into debt to pay existing commitments. This can spiral and have far reaching, longer-term consequences.
44. Universal Credit’s standard allowance (or equivalents in previous systems) is also currently at around its lowest ever level as a proportion of average earnings, at 13%. Even if our proposed Essentials Guarantee were implemented this year at our full indicative level (see paragraph 39), it would boost the standard allowance to just 19% of average earnings, still very moderate in historical terms – having been well above 20% between 1948 and the late 1980s and peaking at 33% in the 1960s).[14]
45. The Essentials Guarantee would also ensure financial work incentives are not altered significantly for most people on Universal Credit because it would boost support for people in work on low incomes and people out of work alike, based on keeping Universal Credit’s existing work allowances and taper rate. It also means the majority of households (three in five) who would gain are in work, helping to address in-work poverty. More details and illustrative impacts on example families can be found in An Essentials Guarantee: Technical Report.[15]
46. By better enabling households to meet their core needs, the Essentials Guarantee would make it easier for households to recover from a setback, including getting into and progressing in work where they are able to. But alongside this, we need to see much more high-quality, tailored and integrated support available to help people overcome health problems and other barriers. This would ultimately reduce the heavy lifting that needs to be done by Universal Credit.

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

47. Official data shows a 16 percentage-point drop between 2019/20 and 2020/21 in the proportion of households on Universal Credit who reported being food insecure, notably coinciding with the £20 per week uplift to Universal Credit’s standard allowance during the pandemic, demonstrating the power of social security.[16]
48. Headline poverty rates also fell in 2020/21, particularly for larger families and people with children aged under five, which is again likely to be due to the £20 per week uplift to Universal Credit (and Working Tax Credit).[17] These families tend to have a higher proportion of their incomes coming from benefits (despite their increasing employment rates in recent years), so are disproportionately affected by general changes in benefit levels.
49. Unfortunately, the negative effect of the removal of the £20 uplift halfway through 2021/22 was seen in the most recent official data, with much of the reduction in headline poverty during the first year of the pandemic reversed.[18] Our research during the pandemic demonstrated both the significant difference that the uplift made to the lives of people struggling to keep their heads above water, and the devastating insecurity arising from knowing this support was likely to be temporary, highlighted by the following examples of what people told us:[19]

a)      “Living on Universal Credit is hard; it’s extremely hard. It is literally living day to day and working out where my next food is coming from. How do I put the electric and gas on? It is horrible. It is a matter of surviving.” (Man from Leeds.)

b)      “I can’t really make plans for the future, I live week to week really. Without that extra £20 I will have to cut back even more.” (Woman from Doncaster.)

c)       “Everything they [the Government] do seems to be on a temporary basis and we don’t live on a temporary basis. We live permanently. We need commitment and we need certainty.” (Woman from Northern Ireland.)

50. Similar temporary effects are suggested linked to the UK Government’s recent Cost of Living Payments, the first of which was paid in July 2022. This correlated with a dip in need seen at food banks. Between 27th June and 10th July (the two weeks preceding the first Cost of Living Payment) food banks in the Trussell Trust network distributed on average over 7,200 parcels a day. In the following three weeks (11th July – 31st July) when the Cost of Living Payment started to come through, this fell to just over 5,500 parcels on average a day, a drop of nearly a quarter.
51. Following this dip in need, food banks in the Trussell Trust network recorded their busiest ever August and September, by huge margins - 40 and 50% higher than in the previous two years.
52. Our analysis of the impact of the November 2022 Cost of Living Payments on food bank need suggests a similar pattern – a significant short-term impact, but without secure, longer term increases in regular incomes, such as through higher regular Universal Credit payments, the impact wears off within weeks.
53. These patterns suggest that while the payment provided some crucial respite for families struggling to afford the essentials, it was not enough to help them manage for an extended period of time. The Trussell Trust’s survey of people in receipt of Universal Credit revealed that most (70%) people who had received their first Cost of Living Payment had already spent all of it less than a month after receiving it. Almost two thirds (64%) had to use the payment to buy food.

What should be the purpose of working-age benefits?

54. The social security system has a range of roles to play. For example, poverty alleviation and prevention, providing individuals with insurance against income shocks, ‘levelling the playing field’ for people who face additional costs or challenges in life, reducing market income inequality, helping people smooth their incomes over their life course, providing an ‘automatic stabilisation’ mechanism for our economy, or supporting people in ways that benefit our country more broadly such as supporting children’s development or staying healthy.
55. Benefits as a whole, and even specific benefits within it, therefore have multiple purposes. What is important is for Government to be clear about the objectives of its benefits policy and about the primary purpose of particular benefits.
56. Our Essentials Guarantee research finds clear public consensus that a primary purpose of Universal Credit’s basic rate is to, at a minimum, provide a reliable safety net that ensures that if we face setbacks or difficult circumstances we can always at least afford essentials for the adults in a household. Paragraphs 26 to 40 give more detail of this and our evidence of how far Universal Credit’s basic rate currently falls short of achieving this purpose.

What is the role of i) the benefit cap; ii) repayments; iii) sanctions on the adequacy of benefits? What is the impact of policy interventions designed to incentivise work, such as sanctions, on the adequacy of support received by individuals—both monetarily, and in how they help individuals to find work?

57. Paragraphs 31 to 40 show how the basic rate of Universal Credit currently falls well short of being enough to even afford essentials like food, utilities and vital household items. However, what matters in practice for people is the actual Universal Credit payment received. This is often much less than the headline rate because various deductions are taken directly from people’s Universal Credit, for example to repay debts to government or third parties (‘repayments’) or resulting from the benefit cap policy.
58. This should not be dismissed as a niche situation: almost half of households on Universal Credit currently have at least one type of deduction being taken from their Universal Credit payment, pulling their support even lower than the already insufficient headline basic rate. These deductions are therefore a critical factor to include when considering the adequacy of benefits.
59. Repayments are by far the most prevalent deduction. In August 2022, 2.1 million households (45% of all households receiving Universal Credit) had debt repayments taken directly from their Universal Credit by the Department for Work and Pensions (DWP).[20] The amounts deducted are significant, with households losing up to 25% of their standard allowance (a small percentage of households in some circumstances lose even more than this) and the average deduction being £62 per month.[21] The vast majority of the amounts deducted (around 85%) relates to debt owed to central government.[22] For example, 60% of people take out a loan from the DWP when they first claim Universal Credit, often needed to help them get through the minimum five-week wait for the first payment.[23]
60. Evidence suggests that the implementation of this policy creates significant negative repercussions for those involved. The government is often seen to be a less responsible lender than the private sector, due to lack of clarity about what is owed and a lack of flexibility and consideration about how much people can afford to pay.[24] What frequently results from these practices are unaffordable rates of repayment which reduce an already insufficient level of support even lower beneath what’s needed to afford essentials.
61. Research from both JRF and the Trussell Trust have found that debt repayment deductions are a key driver of destitution, food bank need, and people going without essentials.[25] In mid-2022, 57% of people referred to a Trussell Trust food bank in receipt of Universal Credit had their income reduced by repayment deductions.[26] 95% of low-income households on Universal Credit facing repayment deductions are going without essentials, compared to 84% of those not facing repayment deductions.[27]
62. The benefit cap policy also results in deductions being made to a household’s Universal Credit that have a similar effect in pulling actual support received even further below the already insufficient headline rate. The benefit cap places a limit on the total amount a household earning less than a certain amount from work can receive from a combination of benefits, regardless of the size of their household, housing costs and need. If their total benefits exceed the limit, then a deduction is applied to their Universal Credit. Around 112,000 households were affected by the benefit cap in November 2022, 86% of which were families with children, with an average deduction resulting from the cap of £50 a week.[28]
63. Our Essentials Guarantee proposal (described in paragraph 19) would address the significant negative effect on benefit adequacy that deductions have. The Essentials Guarantee applies to the ‘net’ value of Universal Credit’s standard allowance after various deductions are made. This ensures that the amount actually received after deductions must be at least the Essentials Guarantee level, enough to cover the cost of basic essentials.
64. People who have recently been sanctioned (usually for missing a Jobcentre Plus appointment) can face unreasonable hardship and stress. For a single adult, a sanction generally means losing all of their Universal Credit standard allowance for between a week and six months. This unsurprisingly has serious negative consequences for people’s financial and mental health, even though the evidence suggests that sanctions are not effective at moving people into sustainable, quality jobs as intended.[29]
65. Our evidence supports this conclusion. As we have shown above, the basic rate of benefits is insufficient to live on anyway, so reducing income further makes this situation worse. The Trussell Trust’s State of Hunger research project found that 100 sanctions was associated with an extra 24 food parcels being given by food banks in a typical local authority area.[30] JRF’s destitution research found that high rates of benefit sanctioning were a key driver of destitution in 2015, before sanctioning levels started to fall over the proceeding years.[31] Worryingly, however, we have recently seen a significant increase again in the number of people being sanctioned.

What role could, or should, an independent body undertake in advising Government on benefit policy?

66. As discussed in paragraphs 26 to 30, our main benefit rates are not based on any objective measure or set according to any rational assessment or evidence of what households need. Without any real logic underpinning it, the basic rate of Universal Credit has been allowed to erode over time.
67. To correct this and ensure our basic safety net remains fit for purpose both now and into the future, it is important to institutionalise two things:

a)      A clear principle into our social security system that Universal Credit should always at least be enough to afford essentials;

b)      And with it, a process that embeds a rational and evidence-based approach to setting the minimum level of support available in the system.

68. We find strong public consensus for a minimum in the system whose purpose is to act as a safety net that ensures people at least have enough to afford essentials. It’s also seen as common sense that this minimum should be set according to a logical assessment of the cost of essentials. As discussed in paragraph 27, judgement is involved in determining what is essential to be covered by benefits and how to estimate these costs, and these things will evolve over time. It is therefore likely to be challenging to simply set down any particular measure or methodology in statute. So there’s a role here for an institutionalised independent process or body to regularly review and commission the relevant evidence, consult on the evolving factors and methodologies and make recommendations on the level. This is similar to the Low Pay Commission’s role in running an annual process of evidence-gathering and consultation before providing a recommendation on minimum wage rates.
69. Our Essentials Guarantee proposal is therefore to require the Government to set the levels of the guarantee (one level for a single adult, another for a couple) at least annually (but with scope for more frequent changes if necessary, according to agreed triggers, such as during periods of high inflation) with reference to a published independent recommendation based on an independent process. That process would draw on evidence of how much is required, at a minimum, to cover the essential core living costs of the adults in a household (excluding rent, mortgage interest and council tax, as these are intended to be covered by separate benefit elements). It would include insight from people with direct experience of living on a low income, as well as consultation on matters such as shifting essential needs and methodological judgements.
70. The list of essential items might only need to be updated every few years, but the cost of each item will certainly change each year (and possibly even significantly within each year). The independent process will therefore need to at least review the costs associated with the essential categories regularly. In most years, it could be a light touch process of at least simply uprating the cost of each category by the specific relevant component of CPI, but the independent process can judge when that’s appropriate or when more ground-up changes to the essential items is needed.
71. Ministers would have a duty to consider and provide a response to this recommendation in Parliament but ultimately would retain the power to set the level, again similar to the Low Pay Commission. These are the important functions of an independent process; whether they would be best performed by a new body or by adapting existing infrastructure (such as by expanding the remit and resources of the Social Security Advisory Committee) should be considered.
72. To be clear, our Essentials Guarantee research shows an indicative level for a minimum in the system necessary to afford essentials of at least around £120 per week for a single adult, but our proposal is that this level should ultimately be for an independent process to determine on a regular basis. Our research demonstrates that it is perfectly possible to undertake this type of exercise to base benefit levels on a rational, evidence-based process and the type of approach that an independent process could take. It also demonstrates how insufficient the basic rate of Universal Credit currently is in order to allow people to afford even basic essential living costs.

Are there any international comparators the Committee should look at for this inquiry?

73. There are international examples of benefits that are more clearly linked to an intended purpose of at least ensuring basic living costs are covered and with values more closely related to these costs. We refer to three of these below.
74. Japan’s Public Assistance benefit sets a minimum living standard (i.e. minimum living expenses) for households according to factors such as the number and ages of family members, and tops household income up to this level if it falls short. In 2005, it was decided to set the Public Assistance minimum living standard at around the same level as the average spending by the bottom decile of the general population, adjusted for family size and ages. This is reviewed every five years by a committee of the Social Security Council.[32]
75. Canadian social assistance benefit schemes vary by province and territory, but generally provide benefits that intend to cover basic living costs, which are calculated separately or combined into a single amount.[33] For example, Prince Edward Island provides a Basic Needs Allowance for expenses such as food, clothing, household and personal requirements. Within this, the amount for food was targeted at 70% of the average cost of Canada’s National Nutritious Food Basket, a measure which also feeds into Canada’s official poverty line.[34]
76. New Zealand recently implemented substantial benefit reforms, part of which was to significantly increase basic benefit rates to levels recommended by the Welfare Expert Advisory Group (WEAG) established by the New Zealand Government.[35] The increases were achieved in a series of steps between 2019 and 2022.[36] The WEAG’s recommended levels were based on budgets drawn up for ‘core expenditure’ (such as food, clothing, rent and utilities) and for spending at a slightly higher level allowing some relatively minimal ‘participation’ spending (for example, playing a sport and cheap presents for family). Core expenditure was largely based on actual costs and/or spending by low-income households and some expert judgement of desirable spending to ensure an acceptable minimum standard of living.[37]

How effective is parliamentary scrutiny of benefits levels? What information should the Government publish to facilitate the effective scrutiny of benefit levels? How frequently should such information be published?

77. Opportunities for regular Parliamentary scrutiny of benefit levels are currently very limited, so the Committee’s inquiry is very welcome. Formally, Parliament gets to vote on benefit levels once a year, when the Government brings forward the annual Social Security Up-rating Order under the Social Security Administration Act 1992, which has to be approved by a motion in each House.
78. However, the focus of this annual debate is simply to approve the increases for that year proposed by the Secretary of State’s annual review of whether benefits have retained their value in relation to price inflation (or earnings inflation in the case of certain pensioner benefits). There is no requirement for the Government to review the absolute levels of benefits in relation to their stated purpose or assessment of needs or benchmarks of adequacy, nor is any such information published by the Government to enable effective Parliamentary scrutiny of this.
79. In addition, as a statutory instrument that is not amendable, Parliament’s ability to exercise effective scrutiny over particular benefit levels within the Order or overall is further limited.
80. Our Essentials Guarantee proposal would greatly improve Parliamentary scrutiny of benefit levels by institutionalising a regular independent recommendation on the level of Universal Credit’s standard allowance with respect to its ability to cover basic essential living costs, along with statutory reporting of the underlying information to Parliament. See paragraph 19 for a description of the Essentials Guarantee, and paragraphs 68 to 71 regarding suggested details of content and frequency of information to be published. 

Further details

81. For further details or to discuss any of the points raised please contact either:

a)      Iain Porter, Senior Policy Adviser, Joseph Rowntree Foundation: iain.porter@jrf.org.uk; or

b)      Ieuan Ferrer, Policy Manager, the Trussell Trust: ieuan.ferrer@trusselltrust.org.

References and notes