Universal Credit and Cost-of-living Crisis  

Summary of the All-Party Parliamentary Group for Universal Credit Tuesday 18 April 2023 

APPG for Universal Credit Co-Chairs: Debbie Abrahams MP and Nigel  Mills MP 

Speakers: Dr. Charlie Berry (Shelter), Iain Porter (Joseph Rowntree  Charitable Trust), Ieuan Ferrer (Trussell Trust) 

Topic: Universal Credit and Cost-of-living Crisis  


Introductory remarks by Debbie Abrahams MP 

  • Debbie Abrahams formally welcomed Nigel Mills MP, who co chairs the APPG. He also sits on the Work and Pensions Select  Committee with Debbie Abrahams MP. 
  • Introduction of the speakers: Dr. Charlie Berry, Shelter; Ieuan  Ferrer, Trussell Trust and Iain Porter, Joseph Rowntree  Foundation (JRF). 

Dr. Charlie Berry, Shelter 

  • The freeze to the Local Housing Allowance is causing  homelessness amid the cost-of-living crisis and driving increasing  homelessness. 
  • The benefit cap disproportionately penalises lone parent families  and prevents domestic abuse survivors and former rough  sleepers from moving out of emergency accommodation into  longer-term homes. 
  • Local Housing Allowance has been frozen since 2020 – but private  rents have risen by 8.4% in England since housing benefit last  matched rent costs. Newly advertised rents have risen even faster  so that just 1 in 50 homes advertised are affordable to people  claiming housing benefits.

  • The freeze undermines other measures the Government has  brought in to deal with inflation and the rising cost of living, as  shortfalls between rents and the allowance cut into a family’s  budgets. 
  • Data from Citizens’ Advice shows that 53% of their private renting  clients in receipt of benefits are in a negative budget, meaning  that they have less coming in each month than they’re spending  to cover rent and other essentials. 
  • 1 in 3 (1.8 million) private renters rely on housing benefit to pay their rent. More than half have a shortfall to their rent – on  average costing them £151 a month. 
  • More than two in five (44%) of privately renting adults in England  – equivalent to 3.6 million people – say rising living costs are  making them more worried about becoming homeless. 
  • The Local Housing Allowance freeze is driving and prolonging  homelessness, the latest available figures show that in the year to  September the number of households made homeless from  privately rented homes increased by 18%. 
  • Inadequate Local Housing Allowance rates mean that families get  stuck in council-arranged temporary accommodation for longer  and that they are more likely to be placed in the worst forms of  temporary accommodation.  
  • In the last year there was a 91% increase in families with children  being placed in B&Bs and a 112% increase in families living in  B&Bs for longer than the statutory limit of 3 months. 
  • Discretionary housing payments, which are often cited by  ministers as the answer for people affected by local housing  authority shortfalls, have seen their funding cut to the lowest  levels in 10 years despite clear evidence of councils running out of  money even before the start of winter 2022. 
  • Local Housing Allowance urgently needs to be restored to cover  at least the cheapest third of local homes and relinked to the real  cost of renting for future years. 
  • A failure to invest in building truly affordable social housing,  meaning low-income households must instead rely on local 

housing allowance to remain in the expensive private rented  sector. The bill for temporary accommodation has also grown by  61% in the last five years, to £1.6 billion.  

Ieuan Ferrer, Trussell Trust 

  • The cost-of-living crisis was increased the usage of food banks. The need seen this year has followed the gradual increase in the  trend of food banks usage since records have been kept from  2017/18. The usage of food banks is not just related to the cost of-living crisis. 
  • From April 2022 to September 2022, food banks within the  Trussell Trust network distributed 1.3 million parcels of food  including 500,000 to children. This is the largest it has ever  distributed. 
  • This represents a 33% increase in total compared to 2021/22. Breaking down the use of food parcels in the United Kingdom,  Wales had the largest increase of 38%, followed by Scotland 34%,  England 33% and Northern Ireland 25%. 
  • Food banks have said this is not sustainable. 
  • A recent Which? survey said 15% of people have skipped meals  compared to 10% the previous year. 
  • Food banks have changed their opening hours to allow working  people to attend. 1 in 5 referred to food banks in 2022 were  working people as they could not afford essentials. 
  • In the Trussell network of food bank, 6 in 10 referrals were on  universal credit. 
  • The budget range of food has increased 25% compared to 14%  for the premium brands. 
  • 15% of people referred to food banks faced universal credit  reductions. 
  • In July 2022, households received the first cost-of-living payment,  where we saw a reduction in the need for food parcels from 7,200  parcels a day to 5,500 parcels, a drop of nearly a quarter. However, in August 2022, it went back to record levels.

  • A survey of people receiving universal credit showed 70% of  people had already spent the cost-of-living payment in less than a  month of receiving it. Two thirds used this to buy food. 
  • The November cost of living payment shows a similar pattern, and figures will be published later. 
  • Based on a survey Trussell Trust commissioned in September  2022, 77% of people agreed that more action needs to be taken  to help people. 
  • In the same survey, it showed that 80% of people agreed with the  statement that everybody should be available to afford the  essentials.  
  • The social security system is not achieving this because it does  not consider how much things cost.  
  • This is why Trussell Trust and Joseph Rowntree Foundation have  launched a campaign. This is based on the principle that the  social security system should support people in buying the  essentials which Iain will cover. 
  • Everybody should be able to afford the essentials, and no one  should need to use a food bank. 

Iain Porter, Joseph Rowntree Foundation 

  • The Joseph Rowntree Foundation has been tracking impact of the  cost-of-living crisis on low-income households via our large  nationally representative 6-monthly tracker surveys. These focus  on households with incomes in bottom 40%. The 3rd wave was  completed just before Christmas and the 4th wave will go into field  research next month. 
  • There is a very worrying situation for low-income households. But  within this, it’s been particularly bad for people on the very lowest  incomes, especially households receiving universal credit. 
  • 90% of low-income households receiving universal credit went  without at least one essential like food, a warm home, toiletries or  showers.  
  • 77% experienced food insecurity in last 30 days; 43% couldn’t  adequately heat homes. 

  • Almost three quarters are currently in arrears with at least one  household bill or repayment. 
  • Universal credit is falling well short of playing its role as an  adequate safety net. 
  • As Ieuan highlighted, this is an intensification of a longer-term  trend of rising destitution and deep poverty, even before the cost of-living crisis and the pandemic. 
  • JRF’s destitution research showed 2.4m people experienced  destitution in 2019, up 54% from 2017. JRF research consistently  shows that inadequate social security support is a key factor. 
  • Today’s benefit levels are simply the result of a historical  sequence of rate changes, in quite an arbitrary way, with rates  never linked to any objective measure or set based on the cost of  what households need. 
  • Without any real logic underpinning it, the basic rate of Universal  Credit – its standard allowance – has been allowed to erode over  time. 
  • It’s currently at its lowest level in real terms for nearly 40 years  and its lowest ever level as a proportion of average earnings. JRF’s new research takes a detailed look at the basic rate of  universal credit – the standard allowance – and asks “is it enough  to do its basic function?” That is, if a family needs support from  universal credit, the standard allowance should, at a minimum, at  least cover core essential bills – things like food, utilities, vital  household items and travel – for the adults in a household. Other elements of benefit system intended to cover other costs – rent and Charlie spoke very well about the shortfalls we’re seeing  in housing support, council tax, additional costs associated with  being disabled, or support for children – so these aren’t covered  in this analysis.  
  • Draws on a range of sources, including ONS data on actual  spending by low-income households, focus groups with the public  (including some groups of universal credit claimants and public  polling).

  • It indicates that around at least £120 p/w is needed for a single  adult and £200 for a couple to afford core essentials for the  adults in a household. 
  • This really is a basic list of items, with conservative estimates of  costs, and it demonstrates that universal credit’s standard  allowance is clearly inadequate. 
  • Universal Credit’s basic rate will be at least £35 p/w below the cost  of essentials for a single adult, and £66 below for a couple based  on the essentials guarantee figure. The gap for under 25’s is even  bigger. 
  • People often receive even less than these already inadequate  headline rates because of various deductions, e.g. debt  deductions, or benefit cap. 
  • For debt deductions, people lose up to 25% of standard  allowance, mostly to repaying debts to government. 
  • JRF’s latest tracker survey found that 95% of people on universal  credit are facing deductions and going without essentials,  compared to 84% of people on universal credit not facing  deductions.  
  • 45% of all households on UC have debt deductions taken. The essentials guarantee would embed in the system the widely  supported principle that, at a minimum, Universal Credit should  enable people to at least afford essentials. This could be enshrined in legislation.  
  • The Essentials Guarantee wouldn’t specify exactly how the UK  government should set benefit rates and rules. 
  • The Essentials Guarantee is a common-sense approach. 72% of the public support the Essentials Guarantee at the  highlighted indicative level; only 8% oppose. 
  • Labour, Liberal Democrat and SNP voters all show support  around the 80% level; 62% of 2019 Conservative voters  supporting the policy. 
  • Implementing the Essentials Guarantee would represent a  significant and widely supported reform of social security,  embedding for the first time a protected, minimum level of 

support linked to a rational calculation of essential needs and  costs. 

Comments, questions and answer  

Nigel Mills MP: Have you costed this? 

Iain Porter: This process would be carried out by an independent  process, but we have judged it to be £22bn. The principle of the policy  is important, having a guarantee in the system. The cost could be  phased in to institutionalise it. Now, it happens in an arbitrary manner.  It is the lowest it has been in real terms in 40 years. This proposal  supports ‘a line in the sand’ in guaranteeing essentials. 

Nigel Mills MP: Are you in contact with other charities and campaign  groups to support this? 

Iain Porter: The big question of how benefits are set is widespread.  However, the principle that there should be a minimum level has the  support of frontline organisations and the public we’ve surveyed. We have partnered with Trussell Trust with this campaign and many  organisations including those in the room, there is consensus for this.  

Debbie Abrahams MP: Nigel and I sit on the Work and Pensions Select  Committee and the terms of reference are currently being drawn up in  terms of looking at the adequacy of benefits and its impact. It is  important to get a broad coalition of support. It is also important to  understand how it may be costed.  

Nigel Mills MP: I think we can at the minimum look at a backbench  debate on this in Westminster.  

Iain Porter: We believe there is cross party consensus on this issue.  There was also The Pensions Commission which looked at pensions on  this matter in the early 2000’s, which received cross party support. 

Alexandra Jones, Gingerbread: We are supportive of the essentials  guarantee and echo the points made. We have seen an increase in calls  about the cost-of-living crisis related to Local Housing Allowance, gaps  of £600. Single parents do not know how they will fill this gap. A lot of 

people are desperate about the housing situation and food insecurity.  The child poverty statistics appear to have improved for single parents  from 49% to 44% in the recent DWP statistics. This is likely due to the  uplift from social security via the cost-of-living payment. 

Jamie Thunder, Z2K: Z2K is an organisation which has a helpline and  gives out grants. We happily support this campaign. We are increasingly  seeing people who receive the maximum they are entitled to and still  cannot make ends meet. People who receive disability benefits are  using what they get to make ends meet on rent and food. 

Alexandra Jones, Gingerbread: Someone called the helpline, who was  working part time and studying for additional qualifications as she  works in the early years sector. These qualifications will help her  improve the level of salary she will receive. However, she was  sanctioned because she missed a job search meeting due to handing in  an assignment. We are worried about conditionality and sanctions. 

Debbie Abrahams MP: We will be holding a session on sanctions later in  the year. 

APPG Actions 

The Co-Chairs agreed to propose a Westminster debate to discuss how  the level of universal credit is determined.  

Turn2us will follow up with the Co-Chairs, the Trussell Trust and JRF to  co-ordinate this action.