How universal credit changes announced in the budget will affect you
As Labour delivers its first Budget in 14 years, here's what it means for universal credit recipients.
Rachel Reeves has delivered the first Labour budget nearly 15 years, outlining the government's plans for the fiscal year ahead.
One of the areas the government has targeted is welfare spend, with Reeves saying Labour had inherited the previous Tory government’s plans to reform the work capability assessment.
Reeves said the Department for Work and Pensions would "deliver those savings" – thought to be worth around £1.3bn – as part of reforms to the health and disability benefits system that are yet to be laid out.
Here's what we know about the changes to universal credit in the wake of the budget.
What changes to universal credit were in the budget?
Fair repayment rate
The chancellor confirmed the government will lower the amount of money people receiving benefits have to pay back to the government.
Currently, some of the lowest income families in the UK are struggling to repay short-term loans and debts like advances or sanctions. At the moment, up to 25% of universal credit standard allowance can be taken by the government.
It will introduce the "fair repayment rate", which will benefit more than one million households in the UK from April 2025, making them £420 better off on average. These repayments have been revised down to 15%.
On average, single parents claiming benefits will get around £39 more a month, and for two-parent families, up to £62, according to charity Save The Children.
Reeves also confirmed the government will look into the issue of overpayments to the likes of carers claiming benefits, who have been left with staggering repayment bills.
Benefits uprate
Reeves confirmed that those claiming universal credit will benefit from a payment increase of 1.7% in April 2025.
Universal credit is normally increased every April in line with the previous September's consumer price inflation rate.
However, the rate of inflation announced by the Bank of England last month was lower than many experts had predicted, leaving some campaigners concerned that the payment increase next year will be smaller than they had hoped, leaving people in need struggling to shoulder the costs.
Last year, the government considered using the October inflation figures to inform April 2024's uprate.
Improve work guidance
Since the government came into power, it has emphasised its plans to bring people claiming benefits and experiencing long-term illnesses back into the workforce.
In the budget, Reeves reiterated the government's focus on employment support reforms. A "get working" white paper will be released to detail the full extent of the plans, which will see the government provide £240m to get people back to work.
This funding will be directed at 16 trailblazer projects targeted at those who are economically inactive or not currently in employment, education or training.
Another aspect of these plans involves merging job centres with the national careers service to improve the guidance offered to those seeking work.
Job centre pilots will also expand to offer more regional support, with work and pensions secretary Liz Kendall planning to give regional leaders greater powers over jobs and employment in their areas.
Fraud bill
The chancellor also signposted the government's fraud, error and debt bill, a plan to crack down on benefits fraudsters by allowing officials to check claimants’ bank accounts.
Announced earlier this month, Reeves said the bill will save £4.3bn a year by the end of the economic forecast.
She said the government will "counter-fraud teams using innovative new methods to prevent illegal activity and provide new legal powers to crackdown on fraudsters, including direct access to bank accounts to recover debt".
The bill has courted controversy, with campaigners warning the government that the proposals could be a breach of privacy, while others say that the language used is “stigmatising” to those who make claims legitimately.
What wasn't mentioned in the budget?
Benefit cap
One of the areas that didn't receive a mention was the removal of the benefit cap and the two-child benefit cap – much to the anger of many campaigners.
In the run-up to the budget, some had argued that any potential improvements in universal credit will not go far enough and that lifting the benefit cap remained critical to improving the lives of some of the most vulnerable households.
The benefit cap applies to most people who are over 16 and below state pension age. This means that:
If you are a couple or single parent: You cannot receive more than £2,110.25 per universal credit assessment period, or £486.89 per week
If you are a single person without children: You cannot receive more than £1,413.92 per universal credit assessment period, or £326.26 per week
With universal credit benefit cap deductions, any payments over the benefit cap are automatically deducted from universal credit payments by the DWP. The government also deducts the excess from housing benefit payments.
It means some recipients are said to be getting by on as little as £4 a day as a result.
There has also been repeated criticism of Labour's refusal to scrap the two-child benefit cap — which the chancellor also did not remove.
The cap, which was introduced by the Conservative government in 2017, prevents parents from claiming child tax credit or universal credit for more than two children.
Charity Child Poverty Action Group (CPAG) said that 10,000 more children have been plunged into poverty since Labour came into power because it has refused to scrap the cap. Now, it warns, another 16,000 will be affected by spring.
"The chancellor missed a golden chance to scrap the two-child limit," a spokesperson for CPAG said. "This was not a budget of bold action on child poverty."
Victoria Benson, the CEO of Gingerbread, a charity helping single parents, said it "remains disappointed" that Labour hasn't scrapped the two-child limit.
"Half of the households hit by this policy are single parent families. If our government is serious about tackling child poverty, it must scrap this unfair policy," she told Yahoo News.
However, in the Labour party manifesto, Sir Keir Starmer said that he wouldn't scrap the cap as he was refusing to commit to "unfunded promises."
Thomas Lawson, the CEO of Turn2Us, warned that the measures unveiled in the budget "doesn't go far enough".
He told Yahoo News: “The government needs to act. Scrap the two-child limit, scrap the five-week wait, and raise Universal Credit to cover essentials. It’s time for a social security system that’s compassionate, free from stigma, and shaped by people with lived experience.”
ESA migration issues
On 28 October, the government revealed that some 800,000 people will be moved on to universal credit from the employment and support allowance (ESA) from this autumn, instead of from 2028,
Labour has said it is part of their plan to get people back into work.
However, there have already been some issues with the migration process with a small number of claimants transferring onto universal credit from ESA being asked by the DWP to provide fit notes or sign a claimant commitment.
If they do not, they could then be ineligible for limited capability for work and work-related activity (LCWRA) payments, which are worth £416 a month.
This suggests that those claiming the benefit will be asked if they are looking for work, and inappropriately sanctioned.
The DWP has said it is "aware of the issue" and is looking to "resolve the situation".