On Tuesday 4 July 2023, there will be an Estimates Day debate on the spending of the Department for Work and Pensions (DWP), with a focus on Universal Credit.
The subject of this debate was selected by the Backbench Business Committee and proposed by the Chair of the Work and Pensions committee, Sir Stephen Timms MP. The debate will take place in the House of Commons Chamber.
The budgetary limits sought by DWP for financial year 2023/24 are:
- £265.5 billion for Resource AME
- £9.0 billion for Resource DEL
- £0.8 billion for Capital DEL
- £0.3 billion for Capital AME
DWP has a relatively large budget for AME because of its significant expenditure on state pension and benefits, including Universal Credit.
More detail on these figures, including changes since last year’s budget, can be found in section 4.1 of the Library’s briefing on the 2023/24 Main Estimates and in DWP's Memorandum to the Estimate.
Universal Credit: background and key developments
Universal Credit (UC) is replacing means-tested social security benefits and tax credits (“legacy benefits”) for people of working age. At January 2023, 2.5 million households on legacy benefits had not yet moved to UC. Those whose circumstances don’t change will move onto UC by a process called “managed migration”. This process has started for tax credit only claimants, and the DWP aims to complete managed migration by 2028/29.
In 2018 the DWP estimated that when fully introduced UC would deliver net economic benefits of £8 billion a year. The National Audit Office said however there was significant doubt about the main benefits of UC and that its future value for money was unproven.
Welfare rights organisations, pressure groups and parliamentary committees have suggested various reforms to UC to make it “fit for purpose”. The Government has however resisted calls for major changes to UC, maintaining that the basic model is sound and that UC has demonstrated its effectiveness, including during the pandemic.
Spending on Universal Credit
The DWP’s total proposed expenditure for 2023/24 is £279.3 billion, of which Resource AME (ie payment of pensions and benefits) accounts for £265.5 billion (95%).
Universal Credit and equivalent benefits are the second largest area of DWP expenditure after pensioner benefits (such as the State Pension, Pension Credit and Winter Fuel Payments).
Expenditure on Universal Credit has increased in recent years. The main driver of this has been caseload rollout, as Universal Credit has gradually replaced legacy benefits. A sharp increase in spending in 2020/21 was also driven by a spike in new claims at the start of the coronavirus pandemic when lockdown restrictions were introduced.
Recent caseload growth can also be attributed in part to increasing numbers of UC claimants with limited capability for work entitlement, meaning they receive an additional amount due to ill-health or disability.