This week marks the introduction of three significant changes to Universal Credit, affecting millions of claimants across the UK. The Labour Party government has launched these reforms to tackle the rising welfare bill and reform the existing benefits system.
Speaking at the start of the new financial year, Sir Stephen Timms, a Labour cabinet member and DWP minister, highlighted the urgent need for change: “The welfare system we inherited has for too long locked disabled people and those with long-term conditions out of work.”
As part of the new laws taking effect, Universal Credit projected expenditure is expected to fall by nearly £1 billion. At the same time, the government is increasing the standard allowance and investing an additional £3.5 billion in employment support programs. According to Timms, this comprehensive approach aims to create a welfare system that actively supports people into work and helps build a better future.
Among the key changes is an increase in the basic Universal Credit allowance, which affects all claimants. Around three million families will see an average boost of £120 in their annual benefits, according to analysis by the Institute for Fiscal Studies (IFS). Matthew Oulton, a research economist at IFS, explained, “The government is rebalancing Universal Credit, shifting support away from claimants with health conditions to other groups, particularly families with three or more children. Half a million families will experience a substantial overnight increase, while another three million will receive smaller rises.”
However, the health element of Universal Credit, which provides extra support to claimants with disabilities or long-term health conditions, is now being halved for new claimants. While the 2.8 million current recipients will be protected, the reduction applies to anyone making new claims. This move has drawn concern from Work and Pensions Committee Chair Debbie Abrahams, who pointed out that government analysis indicates approximately 50,000 people who develop disabilities or health conditions may be pushed into poverty by 2030 due to the cuts. Abrahams called for a delay to the reductions until other supportive policies such as increased NHS capacity and enhanced employment support are fully implemented.
Perhaps the most transformative change is the scrapping of the two-child benefit cap. This policy change benefits around 480,000 families with three or more children, who will now receive an average increase of £4,100 each year. Alison Garnham, Chief Executive of the Child Poverty Action Group, described the removal of this cap as a “gamechanger” for children nationwide who have been deprived of resources essential for learning and growth. She called the two-child limit “one of the nastiest policies for children in modern times” and welcomed the reform as a crucial step toward giving every child a fair start.
Dame Diana Johnson, Minister for Employment, emphasized the impact of this reform: “For too long, the two-child limit has held children back through no fault of their own. With the law now changed, hundreds of thousands of children will grow up with greater security and opportunity. We’re determined to break the link between a child’s background and their life chances, and today brings us a step closer to that goal.”
These Universal Credit reforms mark a significant shift in the UK’s approach to welfare, balancing fiscal responsibility with efforts to support vulnerable families and individuals.