The government has unveiled significant reforms to the Universal Credit system, targeting what it describes as "perverse incentives that discourage work." These changes will see a dramatic reduction in the health element of the benefit for new claimants, while simultaneously increasing the standard allowance for nearly four million households across the UK.
Major Cut to Health Element
Under the new legislation, the health element of Universal Credit will be slashed from £429.80 to £217.26 per month for new claimants. This represents a substantial cut of £212.54, nearly halving the previous amount. The Department for Work and Pensions (DWP) has justified this move by stating that individuals receiving benefits for health reasons currently receive more than double the amount paid to a single person actively seeking employment. According to the DWP, the existing system fails to provide adequate support to help these claimants transition into the workforce.
However, the government has emphasised important protections for vulnerable groups. All existing Universal Credit health claimants will continue to receive the higher rate, ensuring no immediate financial shock for current recipients. Additionally, those with the most severe, lifelong conditions and individuals nearing the end of their lives will also be exempt from the reduction and will maintain access to the full health element.
Standard Allowance Boost for Millions
In a contrasting move, the standard Universal Credit allowance is set to receive a significant boost. From April, when these reforms take effect, the allowance will rise by almost £300 annually. This increase is projected to benefit approximately four million households, marking what the government claims is the first sustained above-inflation rise to the benefit in recent years.
In practical terms, this translates to an extra £295 this year for a single person aged 25 or over. The government has outlined that this cash boost is expected to grow, potentially reaching up to £760 by the end of the decade, providing a long-term uplift for low-income families.
Mixed Reactions from Experts
Work and Pensions Secretary Pat McFadden has framed the reforms as a necessary improvement to a system he previously labelled as "rigged." The government's stated aim is to create a fairer benefits structure that encourages employment while supporting those in genuine need.
However, the changes have drawn cautious responses from industry experts. Kate Underwood, founder of Southampton-based Kate Underwood HR and Training, has warned that the reforms alone will not magically prepare people for work. She highlighted that small and medium-sized businesses may face an influx of applicants with health conditions who will require reasonable adjustments, flexible working arrangements, or phased start dates.
"This only works if employers stop pretending humans are machines," Underwood cautioned. "Otherwise, you'll just see more churn, more absence and more risk in the workplace." Her comments underscore the challenge of integrating health claimants into the labour market without corresponding changes in employer attitudes and workplace practices.
The DWP has reiterated that existing claimants and those with severe conditions will be shielded from the health element reduction, aiming to balance fiscal responsibility with social protection. These reforms represent one of the most substantial shake-ups to the welfare system in recent years, with implications for both new benefit claimants and the broader employment landscape.
