Protected minimum floor in Universal Credit: new policy targeting hardship

1. Introduction

The Government wants to increase living standards, reduce child poverty and end the need for food banks. This briefing sets out a bold and popular policy that can quickly help move towards these goals at relatively low cost.

Deductions and caps in Universal Credit (UC) eat into UC’s already inadequate basic rate, leaving people facing hunger and hardship. 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, to have an even greater impact on hardship and poverty.

Doing this would give 130,000 more people a lifeline out of poverty in 2025/26, including 80,000 children, at an annual cost of around £340 million.

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.

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, 2025b). Over 4 in 5 families who had their UC reduced by the benefit cap in May 2025 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 £59 a week deducted from their UC because of the benefit cap in May 2025, but over 7,000 households saw over £150 a week deducted.

Example household

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.)

3. A protected minimum floor: new policy directly targeting hardship

Before the new Government’s first Budget in 2024, we set out how a protected minimum floor below UC’s standard allowance would be a bold new popular policy limiting the deepest hardship caused by debt deductions and the benefit cap (JRF, 2024).

The policy would limit the total amount, across all types of deduction, that could be taken from a household’s UC. This would ensure that the amount of standard allowance (net of these deductions) could not fall below the floor level.

Having now introduced the Fair Repayment Rate, which limits total debt deductions to 15% of the standard allowance, the Government should build on this and extend the principle to all deductions, including for the benefit cap. This would reduce hardship and poverty even further and create a protected minimum floor 15% below UC’s current standard allowance. In 2025/26, this would mean a floor level of £78 a week for a household headed by a single adult aged 25 or over.

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 quickly implementable at relatively low cost and 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 having a significant immediate impact on hardship, it would also represent vital progress towards an Essentials Guarantee. The Essentials Guarantee is a policy popular with the public (JRF and Trussell, 2023) and backed by a coalition of over 100 charities and other organisations.

4. Impacts and costs of a protected minimum floor

Example household – with 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.

If the Government built on the Fair Repayment Rate by implementing a protected minimum floor 15% below the standard allowance, it would lift 130,000 additional people out of poverty in 2025/26, including 80,000 children, and reduce the depth of poverty for a further 160,000 children in that year.⁴

Overall, around 90,000 families would see their UC payment increase by £75 a week on average in 2025/26 and over 240,000 children in these families would benefit.

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 £340 million in 2025/26, rising to £380 million in 2029/30.

Introducing a protected minimum floor would also boost the effectiveness of other poverty reducing policies. Removing the two-child limit alone would lift 340,000 children out of poverty in 2029/30, but doing this alongside implementing a protected minimum floor would reduce child poverty by 530,000 in the same year (JRF, 2025).⁵

This is because there are currently 141,000 children in families affected by the two-child limit who also see their UC reduced by the benefit cap (DWP, 2025c). These children will not benefit from the removal of the two-child limit unless the benefit cap is also addressed. More families with children would become hit by benefit cap deductions from their UC if the two-child limit is removed, meaning they would not receive the full benefit of the change.

In conclusion, creating a protected minimum floor 15% below UC’s current standard allowance would build on the Government’s Fair Repayment Rate, helping to move even closer towards the goals of increasing living standards, reducing child poverty and ending the need for food banks, at relatively little additional cost.

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, 2022/23 Family Resources Survey using v02_78 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.
The cost of introducing a protected minimum floor if the two-child limit has been removed would be £800 million in 2029/30. This is higher than the standalone cost of a protected minimum floor with the two-child limit still in place, because of the interaction between the 2 policies.