Out-of-work support set to fall to 11.2 per cent of weekly median pay by end of decade
Call for new cross-party mission for social security, with independent body and annual report to hold government to account
The UK's threadbare social security system is on track to reach its lowest level since records began, according to a new report by IPPR.
In 1971, out-of-work benefits were worth 20.1 per cent of a man's weekly median pay. However, after half a century of almost consistent decline, it's on a trajectory to be worth just 11.2 percent by 2030, even after assumptions that benefits are uplifted by inflation every year.
The effects of such dwindling social security levels are well documented. The paper from IPPR points to rising poverty levels, poorer educational outcomes for children, and further additional costs to the state through issues such as worsening physical and mental health.
Evidence also shows how low benefits make it harder for people to find work, get more hours or better work, and ultimately get off benefits. The cognitive impact of poverty, alongside the costs of finding and starting work, including childcare costs, make entering employment much harder.
The report argues that a fundamental issue with Universal Credit is that payment levels are not grounded in living costs. Recent efforts to benchmark benefits against what is needed to get by reveal a large gap in support.
New analysis from IPPR shows the gap between benefit payments and the actual cost of covering the basics is £35 a week for a single person, rising to £84 for someone with added typical housing shortfall and potential deductions.
IPPR is calling for politicians to come together and establish a shared goal for the future role and purpose of social security. This should involve setting a cross-party mission and creating a new independent statutory body for social security, along the lines of the Low Pay Commission, the Climate Change Committee and public sector pay review bodies.
The aim would be to break away from short-term debates over specific levels and unlock a long-term focus on the role of universal credit in tackling poverty. The new committee would have the power to:
Publish an annual report to review progress and hold government to account on agreed commitments
Monitor any impacts of changes in rates on labour market participation and social security caseloads
Advise on potential responsive interventions in the event of sharp increases in living costs
Henry Parkes, principal research fellow at IPPR, said:
“Benefits should provide enough to live on but they have never actually been calculated in relation to the costs people face day to day. This has only been made worse by policies like the benefits cap, the two-child limit and a sharp reduction in support with housing.
“It is time to rethink the role of our social security system. At the moment, it's not providing enough for families to survive, and that is bringing further costs to us as a society and economy.”
Melanie Wilkes, associate director for work and the welfare state at IPPR, said:
“Universal Credit could offer a crucial lifeline to households who are struggling on low incomes. But it is completely out of sync with the costs families are facing, and, as a result, is failing to protect many from poverty.
“We need politicians to move from debates about social security grounded in outdated stereotypes and misperceptions, towards a shared long-term ambition for the purpose and shape of our social security system.”
Faith Angwet, a Universal Credit claimant involved with the Changing Realities project, said:
“Universal Credit rates are getting more and more insufficient as the cost of living has hit low income households like mine with less income, to feed their household and children with.
“The importance of having an independent commission to set benefit rates could not be any more vital to be put into action no later than this present moment."
NOTES TO EDITORS
The IPPR paper, Towards real social security: embedding a long-term approach to universal credit by Melanie Wilkes and Henry Parkes, will be published at 00:01 on Tuesday 3 October 2023. It will be available at: https://www.ippr.org/research/publications/towards-real-social-security
Advance copies of the report are available under embargo on request
Out of work unemployed benefit rate as a proportion of average (male) earnings (replacement rate), actual and forecast
This analysis applies forecasts of earnings growth and benefit levels (assuming benefits will be uprated by inflation as is convention) to estimate the ratio (or replacement rate) up to 2030 for a single adult over the age of 25.
The £35 gap referred to above is calculated by looking at the difference between UC out- of-work rates for a single person over 25, and the weekly cost of essentials (excluding housing costs) as estimated by the Joseph Rowntree Foundation. The £84 gap refers to this basic shortfall plus the average shortfall between actual housing costs and local housing allowances (£35/week) and the average UC deduction (£14/week) according to the latest available data.
This paper has been developed with people with direct experience of the current system: the three core proposals outlined in the report were explored with and supported by people in receipt of social security benefits through a workshop with the Changing Realities project. It provides a blueprint for a longer term, purpose driven approach to social security.
IPPR (the Institute for Public Policy Research) is an independent charity working towards a fairer, greener, and more prosperous society. We are researchers, communicators, and policy experts creating tangible progressive change, and turning bold ideas into common sense realities. Working across the UK, IPPR, IPPR North, and IPPR Scotland are deeply connected to the people of our nations and regions, and the issues our communities face. We have helped shape national conversations and progressive policy change for more than 30 years. From making the early case for the minimum wage and tackling regional inequality, to proposing a windfall tax on energy companies, IPPR's research and policy work has put forward practical solutions for the crises facing society. www.ippr.org