Universal Credit: Do politicians' claims about working more hours add up?

17 September 2021
What was claimed

£20 a week is about two hours extra work every week for Universal Credit claimants.

Our verdict

This is only true in very specific circumstances, and does not mention the fact that many people who work and claim Universal Credit are affected by a 63% taper rate, which means they receive 37p for every pound they earn. It’s true that some people could make back the £20 a week by working two extra hours, but this can’t be applied to everyone.

What was claimed

A single parent working on the minimum wage and already working full-time would need to work more than nine hours a week on top of that full-time job to earn back the £20 uplift and make up for the rise in National Insurance.

Our verdict

Again this will be true for some Universal Credit recipients, but can’t be applied to everyone.

Thérèse Coffey, secretary of state for the Department for Work and Pensions (DWP), told BBC Breakfast on 13 September that the upcoming cut to the £20-a-week uplift to Universal Credit could be offset by a claimant working an extra two hours a week. 

Several hours later Labour MP Jonathan Reynolds, the shadow secretary of state for work and pensions, asked Ms Coffey about her claim in the House of Commons, describing it as “completely wrong”. He also claimed people would actually have to work an extra ten hours per week.

Speaking at Prime Minister’s Questions (PMQs) on 15 September, Labour leader Keir Starmer told Boris Johnson: “A single parent… working on the minimum wage and already working full-time would need to work more than nine hours a week on top of that full-time job just to get back the money that the Prime Minister has taken away from them.”

In March 2020, in response to the pandemic, Chancellor Rishi Sunak announced a temporary one-year uplift in entitlements to Universal Credit and Working Tax Credit of £20 per week (around £1,000 a year)

A year later it was announced that the Universal Credit uplift would be maintained for another six months (while Working Tax Credit recipients were paid a one-off equivalent of £500). This is due to expire at the end of September

There is no single “correct” answer to the question of how many extra hours per week someone would have to work to have the same income before and after the removal of this uplift. It will depend on that person’s circumstances and things like whether they are eligible to pay certain taxes.

With this in mind, it’s potentially misleading for senior politicians to present numbers so definitively. Even if the calculations behind their specific claims do stack up for some Universal Credit recipients, they are not representative of Universal Credit recipients as a whole. 

How Universal Credit works for people in employment

To understand what’s going on here it’s helpful to understand how Universal Credit works, and how claimants who work are affected by benefit contributions. 

The basic rule is that for every £1 an employee earns through work, their Universal Credit will be reduced by 63p due to the “taper rate”. Sometimes this taper rate applies to all earnings while on Universal Credit, but in some circumstances people can earn a certain amount above which the taper rate applies. 

This amount is called a work allowance, and there are two sets of circumstances that mean a person is eligible for it—if a person is responsible for one or more children (or qualifying young persons), and/or they or their partner have a “limited capability for work”. 

If these circumstances apply and the claimant does not receive help with housing costs through Universal Credit then their work allowance is £515 a month, while a claimant who does get help with housing costs has a work allowance of £293 a month. 

Once income tax and National Insurance is taken into account, what claimants take home can actually be lower than 37p per £1. 

People on the lowest pay can be exempt from income tax and National Insurance. The income tax personal allowance is up to £12,570, while National Insurance isn’t paid until an employee earns above £184 a week (£9,568 a year), or a self-employed person makes a profit of £6,515 or more a year.

Was Thérèse Coffey right? 

Dr Coffey was criticised in some quarters after claiming that the removal of the £20 Universal Credit uplift could be made up by working an extra two hours a week, with accusations that she had failed to take into account the way in which benefit contributions are calculated (as outlined above). 

She appears to have made this claim twice, once on BBC Breakfast and once on Sky News where she said: “If I think about the £20 uplift, that's just about two hours of national minimum wage.”

This latter claim isn’t correct. The National Living Wage, the minimum wage for employees aged 23 and above, is £8.91 per hour. Two hours at that wage would add up to £17.82, before any tax. People under the age of 23 who receive the National Minimum Wage would earn even less from two hours’ work.

When asked how Dr Coffey calculated this figure, a DWP spokesperson told Full Fact: “Many claimants are eligible for an in-work allowance, which means that the taper rate does not apply and people keep more of what they earn. 

“For the lowest earners, working two hours more per week at National Living Wage can add up to around £20.”

The spokesperson provided Full Fact with a specific example, focusing on a single parent working eight hours a week at £10 per hour (£1.09 more than the National Living Wage), meaning they earn £320 in a four-week month. In this hypothetical case study, the person lives at home with their parents so there are no housing costs on their claim—which means their work allowance is £515. 

The DWP spokesperson then said this person could pick up an extra two hours of work each week, equalling £20 a week (£80 a month), bringing their monthly earnings to £400—which is below their work allowance threshold, meaning they wouldn’t be subject to the taper rate. In this example, the claimant also earns below the threshold for paying National Insurance and income tax. 

The example sent over by the DWP describes a very specific set of circumstances, which would only cover some working single parents on Universal Credit. It also assumes that the claimant earns more than the National Living Wage. 

Calculations by the Institute for Fiscal Studies put the number of single parent families receiving Universal Credit at 1.3 million in February 2021. We’ve asked DWP how many Universal Credit claimants the circumstances mentioned by Dr Coffey would apply to (how many people on Universal Credit earn below the work allowance, and earn little enough to not pay tax), but were told published statistics were not available. 

What did Labour say? 

In the House of Commons on 13 September, Mr Reynolds asked Dr Coffey “if she now knows how many more hours a single parent working full-time would have to work to make up for the money the government is cutting?”

He later said: “The figure is 10 extra hours a week, so the cut would force that person to work 50 hours a week in total to get what he or she is receiving now.” 

Mr Starmer gave the same example on Wednesday, but said a single parent would have to work for more than nine hours to effectively receive what had been removed by the end of the Universal Credit uplift. 

Labour told us their example is based on analysis carried out by the House of Commons Library. It looks at a single parent, with two children, receiving the housing cost allowance as part of Universal Credit, working 40 hours per week and paying income tax and the new rate of National Insurance at 13.25% (the rate from April 2022 which incorporates the raise announced by the government to fund the new health and social care plan). 

The person in this example earns the National Living Wage (£8.91 an hour) which means they would earn over the work allowance (in this case £293 a month because they already receive help with housing costs) as well as earning enough to pay both National Insurance and income tax. 

In this example, with the £20 uplift in place, the parent would have a monthly income of £2,229.54 (earnings plus Universal Credit). With the uplift removed, their monthly income would fall to £2,142.87 each month on 40 hours a week. 

If they worked a 49-hour week, in line with Mr Starmer’s statement, they would earn £2,228.69—85p below their income before the removal of the uplift. To fully cover the £20-a-week in this example, the parent would have to work 50 hours a week (10 hours more than full time) to have an income of £2,238.23—£8.69 more than their income before the removal of the uplift. 

This means that Labour’s claims are correct, but again it’s important to remember that they only apply to Universal Credit recipients in specific circumstances. 

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