The UK has, in theory, an income safety net to ensure that nobody has too little income to subsist. 

Universal Credit (UC) is supposed to provides a minimum monthly income for all working age adults and their children, provided that those able to work take steps to find employment. 

Pension Credit provides a minimum income guarantee for those above state pension age.

The purpose of these benefits is to ensure that nobody has to be left without financial means; on this basis, some people are excluded because they have savings that they could draw on.

But for this to be called a safety net, it needs to be set at a level sufficient to meet people's basic needs. No government has ever tested benefit levels against this criterion. For many years, rates that had originated in historic expenditure levels were assumed to represent a subsistence level, and uprated each year at least in line with inflation. Over the past decade, they have fallen in real terms, so even if in the past they just about met the most basic needs, this is no longer the case.

Today, we do not have a safety net worth its name. Four main characteristics of means-tested benefits for working-age adults contradict the idea that they provide the “safety” of a guaranteed income to avoid destitution. 

Key Findings

1) Declining value. Working age benefits have fallen relative to both prices and earnings, from levels already assumed to be no better than subsistence.

2) Shortfalls in meeting basic human needs. These cuts leave people having to forego some of the key essentials of life, with some groups not even having enough benefits in total just to cover food and home energy requirements.

3) Inconsistency across groups. There are wide variations in the extent to which different groups’ needs are met. Families with three or more children on minimum benefits are only half as well off as pensioners, and working age adults without children only a third as well off.

4) Holes in the net. The final, particularly damning characteristic is that the majority of people who need these benefits to survive have even less to live on than standard benefit rates imply. This can be, for example, because they are paying back loans taken out while waiting for their first payment, because they have their benefits capped or subjected to the two-child limit, or because their rent is not fully covered by the housing component, so they need to top this up by drawing on the daily living component.

This preliminary paper summarises the above aspects of the “safety net” in the UK. It argues that the current system is not only inadequate but also unfair. A forthcoming, paper will consider the issue in greater detail and suggest principles that a future government should adopt to start to create a fairer system.