Guarantee our Essentials: reforming Universal Credit to ensure we can all afford the essentials in hard times
Losing your job, needing to care for a sick family member, breaking up with your partner – everyone’s circumstances can change. When they do, the social security system should ensure no one goes without the essentials - but it doesn't.
When events like these happen, most people would expect our social security system to support them – and for this support to be based on an objective calculation of what things cost, but this has never been the case.
Our research shows:
- 90% of low-income households on Universal Credit are currently going without essentials.
- Support has eroded over decades and the basic rate (‘standard allowance’) of Universal Credit is now at its lowest ever level as a proportion of average earnings.
- 66% of the public think the basic rate of Universal Credit is too low.
- Almost half of households see their payments reduced by deductions and caps. For example, a household can lose 25% of their standard allowance to repay debts to DWP.
Inadequate social security is the main driver of food bank need, with almost 1.3 million parcels given out from Trussell Trust food banks between April and September 2022. Without an adequate safety net, a setback can be hard to overcome. Poverty comes at a significant cost to the individual, but also to the economy and wider society, with downstream costs to public services such as the NHS.
UK Government should introduce an Essentials Guarantee
The Essentials Guarantee 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:
- an independent process to regularly determine the Essentials Guarantee level, based on the cost of essentials (such as food, utilities and vital household goods) for the adults in a household (excluding rent and council tax);
- that Universal Credit’s standard allowance must at least meet this level; and
- that deductions (such as debt repayments to government, or as a result of the benefit cap) can never pull support below this level.
The Essentials Guarantee level
The UK Government would be required to set the level of the Essentials Guarantee at least annually, based on the recommendation of the independent process. However, our analysis indicates that it would need to be at least £120 a week for a single adult and £200 for a couple.
£ per week
£ per week
|Food and non-alcoholic drinks
|Electricity and gas
|Clothes and shoes
|Communications, including phones, internet and postage
|Sundries - for example toiletries, haircuts, cleaning materials, bank charges
A stronger minimum in the system
If UK Government set the standard allowance above the Essentials Guarantee level, support could be reduced (such as for debt deductions or the benefit cap), but only down to the Essentials Guarantee level. If the standard allowance was set exactly at the Essentials Guarantee level, then any deduction would leave people unable to afford essentials and so would not normally be allowed if someone has no other earnings (but debt repayments would be recovered as earnings rise).
If the Essentials Guarantee were implemented before full rollout of Universal Credit, it should also be applied to the personal allowance of the legacy benefits.
A widely supported system that protects us when we face difficult times
72% of the public support the Essentials Guarantee and only 8% oppose it. 82% of 2019 Labour voters, 83% of 2019 Liberal Democrat voters, and 62% of 2019 Conservative voters support the policy.
- It would embed for the first time a protected, minimum level of support based on an objective assessment of essential costs, directly addressing material hardship.
- 8.8 million low-income families would benefit, including 3.9 million families with children and over half of all working-age families in the UK with a disabled family member.
- It would alleviate in-work poverty, whilst ensuring financial work incentives are not significantly altered for most people on Universal Credit, by keeping its existing taper rate and work allowances.
- The UK’s historically and internationally low income-replacement rates would be modestly improved, giving households more stability to recover from setbacks.
The cost of implementing the Essentials Guarantee at our indicative level would be an additional £22 billion a year in 2023/24 (assuming full rollout of Universal Credit). While this is not insignificant, given the devastating impact that people going without essentials has on our society and economy, there will be savings to public services as a result of improved outcomes, which are not accounted for in our costing.