The Department for Work and Pensions (DWP) is facing a fresh call to introduce a new minimum income guarantee for Universal Credit claimants, with a leading left-wing thinktank proposing weekly rates of £120 for single adults and £205 for couples.
Compass, the thinktank led by Neal Lawson, a key ally of Prime Minister Andy Burnham, has urged the Labour government to adopt the so-called Essentials Guarantee. Under the proposal, Universal Credit payments would be set at a minimum rate that deductions could not reduce, ensuring claimants always receive a baseline level of support.
Proposed rates based on JRF analysis
The thinktank cites initial analysis from the Joseph Rowntree Foundation (JRF) indicating that a single adult needs £120 per week and couples need £205 per week to cover life's essentials, excluding housing costs. These figures would represent a significant uplift from current standard allowances, which range from £338.58 per month for single claimants under 25 to £666.97 per month for joint claimants.
If implemented, the £120 weekly rate for single claimants would raise the standard monthly payment to £480, while the £205 weekly rate for couples would bring the monthly total to £820.
Cost and implementation pathway
Compass acknowledges that moving to this level in full immediately would cost in the region of £15bn per year. However, the thinktank draws a parallel with the national minimum wage, which was introduced gradually and ratcheted up over time to eradicate low pay. It argues that the Essentials Guarantee could similarly be achieved over time, provided the vision and political will exist.
The thinktank says: "Moving to this level in full immediately would cost in the region of £15bn pa. However, just as it took years for the minimum wage rate to ratchet up and eradicate low pay, so too the pathway to an Essentials Guarantee can be achieved over time, so long as the vision and political will to get there exist."
Economic and social benefits
Compass argues that a strong social security system underpins a strong economy by supporting the incomes of low-paid workers and out-of-work people. It strengthens demand, which is critical to supporting growth, gives people breathing space to find better job matches that make good use of their skills, and enables them to take up economic opportunities.
The thinktank adds: "A strong system of social security underpins a strong economy by supporting the incomes of low paid workers and out of work people. It strengthens demand (critical to support growth), gives breathing space so people can find a better job-match that makes good use of their skills, and enables them to take up economic opportunities and be their best at work."
Compass also highlights the wider costs of poverty, stating: "Poverty damages people’s health, potential and children’s education, with lasting effects that further undermine future living standards. So lowering hardship would also improve the economy in the long run, while reducing immediate pressure on public services like the NHS and schools."
Projected impact on poverty and public finances
According to estimates cited by Compass, setting the Essentials Guarantee at the level indicated by the JRF would result in 2 million fewer people at risk of 'hunger and hardship'. It would also reduce costs to wider public services, including the NHS, homelessness services, and children's services, by around £3bn annually by year five.
The thinktank further suggests the policy would contribute around £4.5bn net to the Government's budget through higher tax revenue and lower social security spending, as well as delivering around £10bn in annual benefits to the wider economy.
The proposal now rests with the Labour government and the DWP, who have yet to respond publicly to the thinktank's calls for the new minimum guarantee.
