Why the benefit used by more than 8 million people may not be fit for the future

Easterhouse, located in the east end of Glasgow, has seldom been synonymous with revolutionary change. Historically, it stood as a demonstration of poor housing strategy, characterized by substandard homes constructed under Glasgow's extensive post-war development scheme. By the 1970s and 1980s, the area grappled with prevailing issues of poverty, substance abuse, and lack of opportunity, which catalyzed an environment conducive to gang violence.

However, a significant turning point occurred on a dreary February day in 2002, when then-Conservative leader Iain Duncan Smith visited Easterhouse, sparking a reformation of the welfare system that continues to hold relevance today.

This visit initiated the development of Universal Credit, a welfare program now supporting over eight million individuals. Duncan Smith's primary vision was to incentivize employment, effectively navigating recipients away from dependency on welfare.

As the implementation of Universal Credit approaches its completion within the next few weeks — albeit significantly delayed by nine years and over budget by hundreds of millions — the challenges confronting the welfare system have evolved.

Current statistics reveal that there are approximately 700,000 unemployed graduates receiving benefits, representing a concerning increase of over 200,000 or 46% since 2019, as reported by the Centre for Social Justice (CSJ).

Moreover, a striking shift is evidenced in the statistics surrounding incapacity benefit claims. In 2002, around 25% of these claims cited mental or behavioral health issues; today, that proportion has risen to nearly 50%.

Projected spending on health and disability-related benefits is anticipated to escalate dramatically, rising from £65 billion annually to £100 billion by 2029.

The government contends that the present structure is "a system which encourages sickness," asserting that proposed reforms will address these deficiencies. Nonetheless, the question arises: can Universal Credit and the broader work and benefits framework adapt to the current socioeconomic landscape?

'Making work pay'

Duncan Smith's observations during his visit extended beyond mere poverty to encompass a pervasive sense of hopelessness—an impression that welfare was perceived as an end point rather than a transitional phase.

In the following years, informed primarily by his work with the CSJ, which he founded, Duncan Smith conceptualized a simplified welfare system geared towards ensuring that employment was a more viable option.

This new approach consolidated six separate benefits into a singular monthly payment.

The essence of "making work pay" hinged on removing previous disincentives within the welfare framework that discouraged entering the workforce. Universal Credit was designed to rectify this by permitting recipients to retain a greater portion of their earnings.

"You needed a maths degree to work out whether you were better off moving into work under the old system," explained Joe Shalam, director of policy at the CSJ and former special adviser in the Department for Work and Pensions (DWP).

"This change has been viewed by many in Britain and internationally as a significant enhancement in the welfare process, reinstating employment incentives for countless individuals."

In 2019, the government reported a reduction of one million workless households since 2010 attributable to their welfare reforms.

The basic rate

However, Universal Credit functions within a broader context.

Following the Conservative victory in the 2015 election, a four-year freeze on working-age benefit levels was introduced, diminishing the real value of these payments. Anti-poverty advocates have long attributed the rising challenges families face, documented by the significant increase in food bank usage, to the inadequacies in the design and value of Universal Credit.

UC claims rise

To mirror the process of traditional monthly salaries, new claimants face a five-week waiting period before receiving their initial payment. Many low-income households lack the financial reserves to endure this waiting period and consequently turn to borrowing, often accumulating debt.

While the DWP offers an interest-free advance equivalent to the first month’s payment, this amount is recouped from future Universal Credit payments over a two-year span.

Citizens Advice reported that in 2025, two-thirds of the individuals they assisted with repaying DWP loans also required support to access food banks.

According to David Mendes da Costa, principal policy manager at Citizens Advice, the five-week waiting period requires "urgent attention."

"Universal Credit is intended to function as a safety net, not to ensnare individuals in debt from the very beginning, yet that is the daily reality our advisors encounter."

Olivia Diss, an unemployed individual from Essex, articulated that the standard £317 monthly allowance for under-25s provides little financial support. She frequently relies on assistance from her parents, expressing frustration over this dependency.

"It presumes," observes Diss, "that parents will cover the shortfall. There is a glaring omission in effectively facilitating the transition from unemployment to self-sufficient employment."

Increasing the basic allowance

A considerable number of Jobcentre Plus personnel and welfare advisors privately acknowledge that the fundamental standard rate of Universal Credit is insufficient for a basic living. Such shortcomings are believed to contribute to the growing number of recipients claiming the health component of Universal Credit, a concern noted in a government publication last year.

The paper highlighted that the inadequate standard benefit levels create a "logical – but perverse – incentive for individuals to also seek the health component."

Individuals qualifying for the health element of Universal Credit have not been similarly supported in their pursuit of employment, which has resulted in a situation where many genuinely wishing to work find themselves marginalized from the labor market.

For example, individuals aged 25 or over on the basic allowance currently receive £400 per month but may receive an additional £423 if deemed unable to work due to health issues.

Consequently, officials will implement a 6.2% increase in the basic allowance come April — exceeding inflation rates — with intentions to sustain this adjustment annually until 2029/30. Simultaneously, there will be a reduction in the health top-up value for the majority of new claimants.