A new analysis by the Centre for Social Justice (CSJ) reveals that unemployed individuals on welfare will receive £2,500 more annually than a person working full-time on the national minimum wage in 2026/27.
The figures show that welfare recipients, particularly those claiming sickness-related support, are set to outpace low-income workers after taxes and deductions.
Income Comparison: Welfare vs. National Living Wage
According to the report, a Universal Credit claimant receiving Personal Independence Payment (PIP) for ill health along with average housing benefits will be entitled to £25,000 per year without employment.
In contrast, a person employed full-time and earning the national living wage will take home £22,500 annually after deductions such as income tax and National Insurance.
Generosity of the Welfare System Highlighted
The CSJ’s findings illustrate just how generous the UK welfare system has become, sparking renewed debate over the balance between supporting vulnerable individuals and incentivising work.
The timing of this data is significant, as it follows Sir Keir Starmer’s recent decision to revise his Welfare Reform Bill, which initially proposed £5 billion in cuts to disability benefits.
Single Parents Could Receive Up to £37,000 Annually
The study also found that a single unemployed parent, diagnosed with anxiety and raising a child with ADHD, could be eligible for as much as £37,000 per year in combined welfare support.
Former Ministers and Policy Experts Raise Concerns
Sir Iain Duncan Smith, former Work and Pensions Secretary, expressed concerns over the findings. He pointed out that before the COVID-19 pandemic, the UK had the lowest number of workless households on record.
He added that since the pandemic, the disincentive to seek employment has significantly increased due to the structure of the current benefits system.
Echoing this sentiment, Joe Shalam, Policy Director at the CSJ, stated: “While it’s essential to protect individuals unable to work due to health conditions or disabilities, our research suggests that too many people are now stuck in a cycle of dependence, unable to realise their potential.”
Conclusion
The findings from the Centre for Social Justice bring to light a growing divide between income earned through employment and government benefits. While it remains vital to protect the vulnerable, the current welfare structure may inadvertently discourage work. As political leaders adjust welfare policies, the challenge lies in striking a fair balance between supporting those in need and motivating economic participation.
Frequently Asked Questions
1. How much will a Universal Credit claimant receive in 2026/27?
A non-working individual receiving average housing benefits and PIP is expected to receive around £25,000 annually.
2. What is the expected income for a minimum wage worker in 2026/27?
A full-time employee on the national living wage will earn about £22,500 after tax and National Insurance deductions.
3. Why is there concern about the current welfare system?
Experts argue that the generosity of benefits may create a disincentive for people to seek employment, especially post-pandemic.
4. What changes were proposed in the Welfare Bill?
Sir Keir Starmer’s original bill included £5 billion in cuts to disability benefits, but it was recently scaled back.
5. Who conducted the analysis mentioned in the report?
The findings come from the Centre for Social Justice (CSJ), a think tank focused on welfare and social policy issues.