The Department for Work and Pensions (DWP) has broken its silence on calls to update the capital limits for Universal Credit, which have not changed for 20 years. The Work and Pensions Committee and Education Committee held a joint meeting in the House of Commons on Friday to discuss the issue.
Witness Testimony Highlights System Flaws
The committees heard from Sam Richards, a single mother with a 12-month-old son named Oscar. She told the MPs: "The Universal Credit system as it stands now creates a poverty trap. The upper capital and lower capital limits have not changed for 20 years."
Under current rules, to claim Universal Credit, a single claimant or a couple must have no more than £16,000 in money, savings, and investments. Savings below £6,000 do not affect the award. For savings between £6,000 and £16,000, payments are reduced by £4.35 for every £250 held, with an additional £4.35 deducted for any remaining amount under £250.
Inflation Has Eroded the Value of Limits
Ms Richards highlighted the impact of inflation: "In 2006, £6,000 bought you a lot more than it does now, and the same with £16,000 as the upper. This is what I feel like; you are trapped. If you work more hours, your Universal Credit income goes down. You are always on this wheel trying to catch ahead of you, and you cannot get out of it."
Analysis shows that if the capital limits had risen in line with inflation since 2006, the lower limit would now be worth over £10,600, and the upper limit would exceed £28,000—£12,000 higher than the current threshold.
DWP Responds to Calls for Change
A DWP spokesperson responded to the criticism, stating: "We’re committed to moving from a welfare state to a working state, so that work always pays and people can move into good, secure jobs, and out of poverty. That’s why we've deployed 1,000 Pathways to Work advisers who are supporting people left behind by the previous Government, are helping sick or disabled people into jobs backed by £3.5billion by the end of the Parliament and removing the sickness incentive in Universal Credit. We’re also tackling the cost-of-living pressures by increasing the National Minimum Wage, taking money off energy bills and launching the Crisis and Resilience Fund."
Impact on Claimants
The current system means that claimants with savings between £6,000 and £16,000 see their benefits reduced, which can disincentivise saving and working additional hours. Ms Richards' testimony underscores the strain on families who find themselves unable to build a financial cushion without losing support.
The committees have not yet announced any specific recommendations, but the hearing has reignited debate over whether the capital limits should be updated to reflect modern costs of living.
