Ministers need to address the ‘young parents’ penalty in Universal Credit

A ‘young parents’ penalty in Universal Credit means that young single parents are over twice as likely to lose out than to gain when moving over from the old benefit system, according to new a report published today (Tuesday) by the Resolution Foundation.

The report, A fraying net, supported by the Health Foundation, explores how young adults (aged 16-24) have fared under the UK’s social security system over the past 20 years, and focuses on their treatment under Universal Credit.

The report notes that young people have always been more reliant on the benefit system than other working-age groups, but that the gaps have been narrowing. Since the mid-1990s, a combination of lower unemployment and reductions in the value of benefits for young people mean that the share of their income provided by the benefits system has declined by 9 percentage points to 14 per cent (compared to a 4 percentage point fall to 12 per cent for working-age people aged 25 and over).

Turning to the UK’s new benefit system, the report says that Universal Credit should offer a better system for many young people. Its simplified structure is expected to boost the benefit take-up rate among young people in particular; its prioritisation of renters favours younger claimants; and, its shift towards taking savings more fully into account when means-testing benefits has less of an impact on those with little savings (such as young adults).

However, A fraying net warns that these gains risk being undermined by a specific reduction in generosity for young people moving across to Universal Credit. Overall, under the new system, the report predicts that 16-24-year-olds will lose out by an average of £100 a year (assuming take-up rates improve, as they are expected to do).

These losses are concentrated among single parents aged 24 and under. This is because the switch to Universal Credit means all under 25s will be paid £15.20 per week less than otherwise identical but older claimants. In contrast, under the old benefit system only out-of-work single people lost out by virtue of being young via a lower rate of Jobseeker’s Allowance (JSA) and Employment and Support Allowance (ESA).
This change particularly affects younger single parents, with two in three (67 per cent) experiencing a fall in income as a result of the switch, while only 32 per cent get an income boost. By contrast, 56 per cent of older single-parent recipients (aged 25+) experience an income fall, and 41 per cent an income increase, as a result of the switch to UC.

The reduction in support under Universal Credit fits into a wider pattern of cuts in support for young people across the past 20 years. This includes reductions in housing benefit to those under-25 (and the under-35s since 2012), as well as a reduced rate for under-25s on out-of-work benefits, brought in with JSA in 1996. All of this has left a fraying social safety net for young adults, says the Foundation.
The Foundation warns that with child poverty rates on course to reach their highest level since records began 60 years ago, the government needs to reform and strengthen the social security safety net for young adults, and young parents in particular. It recommends awarding young single parents (aged 18-24) the same basic allowance under Universal Credit as parents aged 25+, acknowledging that their responsibility for a child (or children) effectively places them in the same life-stage bracket as older adults.

Fahmida Rahman, Research and Policy Analyst at the Resolution Foundation, said:
“Over the past 20 years, successive governments have chipped away at the social safety net for young adults, despite that group being more reliant on benefits than other working-age groups.
“Universal Credit should be an opportunity to address this problem. But instead its design has created a ‘young parents’ penalty, with young single parents twice as likely to lose out under the new benefit system as they are to benefit from it. This harsh treatment comes at a time when child poverty is already projected to rise.
“With an election looming, now is the time for both parties to rethink their approach to the design of Universal Credit. This should include addressing the ‘young parents’ penalty and recognising that all low-income families need support when bringing up children, irrespective of their age.”

Jo Bibby, Director of Health at the Health Foundation who commissioned the policy analysis and recommendations, said:
“Benefits policy is a sector which isn’t often associated with health. However, the tremendous impact having a safety net to fall back on has on the futures of our young people should not be underestimated. These recommendations clearly set out where the government can take action now to secure the health of our young people for the future.”

Note to editors:

• This report is supported by the Health Foundation as part of its ‘Young People’s Future Health’ enquiry.