A protected minimum floor in Universal Credit to cut deep child poverty

1. Introduction

The Government wants to provide immediate breathing space for families, help them afford essentials and reduce child poverty. This briefing sets out a bold and popular policy that can quickly and cost-effectively help move towards these goals.

Deductions and caps in Universal Credit (UC) eat into UC’s already inadequate basic rate, leaving people unable to afford essentials. Creating a protected minimum floor would build on the Government's recent Fair Repayment Rate for debt deductions, extending the principle to the benefit cap.

Doing this would lift 130,000 people out of very deep poverty in 2027/28, including 100,000 children, at an annual cost of around £680 million.

Correction: This new briefing replaces one originally published on 9 October 2025. The scrapping of the two-child limit in April 2026 changed the policy context and meant the impacts of introducing a protected minimum floor cited in the original briefing are no longer relevant. This new briefing provides updated modelling of its impacts now the two-child limit has been scrapped. Notwithstanding this, a coding error was discovered which affected the poverty impacts in the original briefing. This has been corrected for this new briefing, with the impact of the error on the original briefing described in Note 6 below. The correction would not have affected the narrative or conclusions of the original briefing and all other figures in it would have remained unchanged.

2. Deductions and caps in Universal Credit exacerbate hardship

Around half of households receiving UC have at least 1 deduction taken from their payment, including:

debt deductions: amounts deducted to repay debts to the Department for Work and Pensions (DWP) or other creditors, for example, ‘advance payment’ loans from DWP, used by people to help them through the 5-week wait for their first UC payment
benefit cap deductions: if a household’s earnings are too low and their total benefits exceed the benefit cap amount, then this difference (the ‘capped amount’) is deducted from their UC payment.

Many households face both deduction types at the same time: 62% of households with a benefit cap deduction in February 2026 also had a debt deduction, with around three quarters of these seeing a debt deduction of over 10% of their UC standard allowance (DWP, 2026a).

These deductions eat into UC’s already inadequate basic rate (standard allowance), pulling support even further below what is needed to afford essentials like food, utility bills, clothing and hygiene products (JRF and Trussell, 2023). Our research has consistently found that the benefit cap and debt deductions are significant factors in people experiencing destitution (JRF, 2023) and needing to use a food bank (Trussell, 2025).

The Government recently took a very welcome step towards addressing this by introducing the Fair Repayment Rate from April 2025 (DWP, 2025a). This caps the total amount of debt deductions that can be taken from someone’s UC payment at 15% of UC’s standard allowance, down from 25% previously.¹ However, this limit does not apply to other types of deduction like the benefit cap.

The benefit cap disproportionately impacts families already at high risk of hardship (DWP, 2026b). Around 4 in 5 households who had their UC reduced by the benefit cap in February 2026 had children, and of these:

around 5 in 6 were single-parent families
over half had 3 or more children
over half had a youngest child under 5 years old.

On average, households had £55 a week deducted from their UC because of the benefit cap in February 2026, but over 7,000 households saw over £150 a week deducted.

The Government has acted powerfully on child poverty by scrapping the two-child limit on UC from April 2026, estimated to lift 450,000 children out of poverty in 2029/30 (DWP, 2026c). However, many children affected by the two-child limit will not benefit from its removal because their family is subject to the benefit cap.

Scrapping the two-child limit actually results in more families becoming affected by the benefit cap due to their benefit income exceeding the cap after removal of the two-child limit. The DWP estimated that in 2029/30 around 50,000 families would not gain at all from scrapping the two-child limit because they are subject to the benefit cap and around 10,000 families would only partially gain because they start to be benefit capped. A new protected minimum floor in UC, described below, would help maximise the positive impact of removing the two-child limit, by restricting excessive benefit cap deductions.

A single person aged 25 or over currently receives a headline UC standard allowance of £92 a week. This is already below JRF’s destitution income line of £95 a week. If this person was subject to a debt deduction at the Fair Repayment Rate of 15% then their UC would be reduced by £14 a week. If they were also subject to an average benefit cap reduction² of £59 a week then they would be left with just £19 a week to cover essentials after they’ve paid rent. (Even if their benefit cap reduction was half the average amount, they would be left with less than £50 a week after paying rent.)
Example household

3. A protected minimum floor: new policy targeting hardship and deep child poverty

The Government wants to provide immediate ‘breathing space’ for families struggling with the cost of living and make life’s essentials more affordable. This is particularly important for people under the greatest pressure, including children experiencing the deepest poverty, who the Government wants to help as part of its child poverty strategy ambitions.

A protected minimum floor below UC’s standard allowance would be a bold new popular policy that would immediately limit the deepest hardship caused by debt deductions and the benefit cap, particularly for families with children.

The Government could implement this quickly by building on its introduction of the Fair Repayment Rate, which limits total debt deductions from UC to 15% of the standard allowance. Extending this principle to all deductions, including the benefit cap, would reduce hardship and deep child poverty even further and create a protected minimum floor 15% below UC’s current standard allowance. This would mean the amount of standard allowance (net of these deductions) could not fall below a floor level of £73 a week for a household headed by a single adult aged 25 or over in 2026/27.

A protected minimum floor would embed for the first time the principle of a safety net below which no one should fall. This framing could bring political advantage that is harder to achieve from references to obscure debt deduction rules, or the politically challenging removal of the benefit cap. The Labour Government of 1997, with the creation of the minimum wage, inserted a wage floor into the labour market with lasting impact on the living standards of low earners. This bold and positive policy would carry an echo of that earlier policy, by creating a floor to protect the incomes of the worst off.

The policy is popular with the public (More in Common, 2024); 58% of the public would support the Government implementing a protected minimum floor, compared to 8% who would oppose it. There is majority support for it in all 5 voter segments that voted decisively for Labour in 2024.³

Well there’s got to be some kind of safety net, because if they don’t have enough… you can’t take them below what they need.
Trish, Norfolk (More in Common, 2024)

A protected minimum floor could be implemented quickly via regulation changes. UC regulations set out exactly how much should be deducted from a household’s UC payment under the benefit cap policy (Universal Credit Regulations, 2013). These regulations could be amended (without a parliamentary vote) so that the sum of the ‘capped amount’ and any debt deductions is limited to the difference between a household’s standard allowance and the level of the protected minimum floor.

However, primary legislation could be used to more firmly establish a new policy lever that could be deployed gradually over time to further strengthen UC’s minimum protection, guided by independent expert advice on the minimum amount people need to cover essential costs.

Alongside a protected minimum floor being warmly welcomed in its own right and providing significant immediate breathing space for families in the deepest hardship, it would also represent vital progress towards an Essentials Guarantee. The Essentials Guarantee is a policy popular with the public (JRF and Trussell, 2026) and backed by a coalition of over 100 charities and other organisations.

4. Impacts and costs of a protected minimum floor

Returning to the same example household of a single adult aged 25 or over, debt deductions and the benefit cap had in combination reduced their UC payment by £73 a week, leaving them with just £19 a week to cover essentials after they’d paid rent.
With a protected minimum floor 15% below the standard allowance, the total reduction to UC experienced by this household would be limited to £14 a week, leaving them with their floor income of £78 a week. They would therefore benefit by £59 a week from this policy, a very significant amount for someone facing deep hardship.
Example household — with a protected minimum floor

If the Government built on the Fair Repayment Rate by implementing a protected minimum floor 15% below the standard allowance, it would lift 30,000 additional people out of poverty in 2027/28, three quarters of whom are children.^4,5,6 As the protected minimum floor would target support towards families in the most severe hardship, the impact on very deep poverty is greater. The floor would protect 130,000 people from very deep poverty, including 100,000 children.

Overall, around 120,000 households, containing 440,000 people of which 280,000 are children, would see their UC payment increase by £110 a week on average in 2027/28. Almost all these children are in poverty.

Many families would see significantly higher gains. There will also be some families who currently face smaller reductions from both the benefit cap and debt deductions that on their own would not result in them benefitting from the floor, but who will benefit as a result of the floor applying to their combined reductions.

This policy would cost £680 million in 2027/28. The cost rises to £760 million in 2029/30, with 160,000 people protected from very deep poverty, including 120,000 children. This would be one of the most cost-effective policies for further reducing deep child poverty.⁷

Conclusion

Creating a protected minimum floor 15% below UC’s current standard allowance would build on the Government’s Fair Repayment Rate, providing immediate breathing space for families and helping them afford life’s essentials, while cost-effectively reducing deep child poverty.

Notes

Deductions can still be taken beyond this limit in some cases, such as ‘last resort’ deductions for rent arrears where someone is at risk of being made homeless.
Even a single person with no children can be affected by the benefit cap if they live in an area with high rents. In this case, their UC housing element combined with their standard allowance could trigger a benefit cap reduction, even though their housing element would be entirely paid out on rent.
More in Common segments British voters into 7 segments based on core beliefs, values and behaviours (More in Common, 2025). In the 2024 general election, a plurality in 5 of 7 segments voted for Labour.
JRF analysis of DWP, 2024/25 Family Resources Survey using v02_97 of the IPPR Tax Benefit Microsimulation model. Modelling this policy relies on relatively low sample sizes, suggesting there may be a wider than normal margin of error.
Modelling results for ‘poverty’ are based on having a household income (after paying housing costs) below 60% of the UK median, adjusted for family size and composition. Those for ‘very deep poverty’ are based on household income (after paying housing costs) below 40% of the median, again adjusted for family size and composition.
The original version of this briefing published on 9 October 2025, before the two-child limit was scrapped, stated that introducing a protected minimum floor would lift 130,000 people out of poverty in 2025/26, including 80,000 children. Correcting the coding error described in the Erratum would have changed these figures in the original briefing to 50,000 and 40,000 respectively.
Modelling by the Institute for Fiscal Studies (IFS) has previously shown that removing the benefit cap would have one of the lowest annual costs per child brought out of deep absolute poverty from a range of policy options (IFS, 2024 – Table 6.7). A protected minimum floor would act primarily by limiting the benefit cap.