Volatile and inadequate income adding to stress for couples on Universal Credit as living costs soar

The new IPR report highlights multiple challenges faced in particular by couples
The new IPR report highlights multiple challenges faced in particular by couples on low incomes.
A new report reveals the stark realities for couples in receipt of Universal Credit as the system is set to be extended and more claimants become eligible.

Fluctuations in income from month to month for those in work, and inadequate levels of benefit for those out of work in particular, are placing significant stress and strain on couples with joint claims for Universal Credit, according to the authors of a new report. These challenges add to current concerns about how people on low income will cope as living costs soar.

Detailed research, published today (Wednesday 26 January) by the University of Bath Institute for Policy Research (IPR), focuses on the experiences of couples on Universal Credit. Funded by the Economic and Social Research Council (ESRC), part of UK Research and Innovation, and carried out by a team at Bath and the University of Oxford, it is the first independent research to focus on couples claiming Universal Credit.

Watch Dr Rita Griffiths give evidence to the Work and Pensions Committee.

The authors suggest that Universal Credit often does not help people to budget, as suggested by government, but instead can make this much harder. Many couples suffered big swings in the income they received each month. This was because, for most of those in work, all earnings received in any one month are taken into account when calculating entitlement for Universal Credit, regardless of what period those earnings are paid for. And claimants only know the amount of Universal Credit due a week in advance of the payment. The research finds this volatility is worse for couples with two earners, particularly when paid child care is involved.

For those with no earnings coming in, the main issue was the inadequacy of income from Universal Credit, especially for those with debt repayments, and the under-25s who receive a lower standard allowance. Both the insecurity of income for those with one, or especially two, earners and the inadequacy of income for those out of work on Universal Credit could adversely affect mental well-being and the stability of relationships.

Drawing on insights from in-depth interviews with claimants in 2018/19 and 2020*, the authors suggest that there is a mismatch between how the government envisaged Universal Credit would change behaviour and how recipients are responding to and experiencing it in practice.

The challenges faced by working couples include the fact that childcare costs in Universal Credit have to be paid up front, are only partially covered, and are reduced by the means test as earnings rise. Some parents therefore avoided paid child care altogether. Those who did use it struggled with the gap between what they had to pay for child care and the financial help they received, and with the administrative burden of evidencing and reclaiming the costs.

The ongoing monthly means test also caused problems for working couples. If earnings rose, for one or both partners, their increased joint earnings not only reduced their Universal Credit payment but also often resulted in loss of entitlement to other forms of means-tested help, including support with council tax and free school meals.

The volatility of their incomes meant some had to turn to foodbanks or to family for help. Some women in couples reduced their working hours or left their jobs to try to keep the household income steady. Rather than helping people to stay in work and increase their hours, the Universal Credit rules could make this more difficult.

On the other hand, some couples appreciated receiving a higher Universal Credit award if their earnings decreased because of illness or part-time work. Others earned as much as they could to try to come off Universal Credit - but those with children found the long hours needed because of their low pay could create real tensions with their family life.

For couples in which neither partner was working, the analysis describes the struggles this group has to make headway, compounded by income inadequacy, debt and deductions, and sometimes poor mental health.

The researchers also suggest that the single payment made to couples, and the obligation to label one parent as -lead carer-, were often seen as being out of line with modern family life. This bears out the findings of the first report from this research (published 2020), which focused on how couples managed the Universal Credit claim itself and their household finances.

Lead researcher and author Dr Rita Griffiths , from the Institute for Policy Research at the University of Bath, explained: -The logic of monthly assessment in Universal Credit is that people are motivated to work and increase their earnings because they see an immediate financial reward. However, for many in our research, this super-responsive means testing, together with the high rate of benefit withdrawal at that time as earnings increased, created income insecurity and stress.

-The damage to emotional well-being and couple relationships caused by financial uncertainty, and the disproportionate effects on women, led some to reduce their hours of work or leave jobs. Others worked longer hours to enable them to leave Universal Credit - but this meant less family time, so it involved significant trade-offs.

-Increasing the work allowance and reducing the taper to 55 per cent will certainly help working families to keep more of what they earn, but whether it encourages both parents to work, or to work longer hours, remains to be seen. The support offered to help low-waged parents manage work and child care also urgently needs to be reviewed if mothers are to be persuaded to work more, as required if Universal Credit is to succeed in its aims.-

First introduced in 2013, and phased in slowly since then, Universal Credit replaces six means-tested benefits and tax credits for those on low incomes both in and out of work. According to the latest figures, nearly 6 million people are currently on Universal Credit across Great Britain. In 2022, more people are expected to be drawn into Universal Credit due to a reduction in the taper rate and an increase in the work allowance, in addition to the ongoing process of migration for those people still on legacy benefits.

Crucially, Universal Credit is designed to be different from previous support, being paid to people both in and out of work. Monthly assessment and a single monthly payment are meant to make Universal Credit more like work. For people in work, a single taper rate reduces Universal Credit as pay increases, above any earnings ignored. For couples, this applies to the earnings of both partners.

The current taper rate is 55% (reduced from 63% at the time of the research), meaning that for every net pound you earn over your work allowance, Universal Credit will be reduced by 55p. A work allowance is only available if you are a parent or have a health condition or disability that affects your ability to work. Currently the work allowance is set at 335 per month if you are getting housing costs as part of Universal Credit or 557 if you do not receive housing support. The aim is to encourage entry into paid work and higher earnings. Couples get one household payment for them both, made to one account.

Couples Navigating Work, Care and Universal Credit - Institute for Policy Research, University of Bath (January 2022) is authored by Rita Griffiths (Bath), Jane Millar (Bath), Marsha Wood (Bath) and Fran Bennett (Oxford). Couples balancing work, money and care: exploring the shifting landscape under Universal Credit.

  • For the research, two waves of in-depth interviews were carried out approximately two years apart. The first phase of the research comprised 123 individual and joint face-to-face interviews with 90 Universal Credit joint claimants in 53 households, in four areas in England and Scotland, between June 2018 and January 2019. Follow-up interviews were conducted by telephone (due to COVID-19) with 63 participants in 39 households between August and October 2020.
  • For the longitudinal analysis, the sample of 39 households was categorised according to their earner status into three main groups at (or in a few cases before) the interviews in 2018/19: two-earner couples (10 households), one-earner couples (13 households) and no-earner couples (16 households).

  • Drawing on longitudinal data from 157 interview transcripts, the researchers tracked employment transitions over time, and the reasons for this. For each couple, they produced a detailed case summary which examined continuity and change in employment status, gender roles and couple relationships. These case summaries were then analysed to identify themes and drawn on to write the report.