This briefing paper explains how Universal Credit is acting to increase the number of people claiming unemployment benefits, by requiring a broader group of claimants to look for work than was the case under Jobseeker’s Allowance.
This effect is clearly visible in areas operating Universal Credit “Full Service,” where the rollout of Universal Credit is more advanced. In Universal Credit “Full Service” areas, the claimant count increased by 25.5% in the year to January 2017. This compares to a 0.1% increase in the claimant count across the UK as a whole. (Source: PQ 66330, 7 March 2017, ONS Nomis)
The claimant count is the number of people claiming benefits for the principal reason that they are unemployed. Before 2013, this was just the number of people claiming Jobseeker’s Allowance.
Following the introduction of Universal Credit from 2013 onwards, the claimant count is now measured as the number of people claiming Jobseeker’s Allowance plus the number of Universal Credit claimants who are required to look for work.
Universal Credit is a new benefit which is being rolled out in stages. It replaces six existing benefits and tax credits (“legacy benefits”):
By bringing together out-of-work benefits and tax credits, Universal Credit provides both in- and out-of-work support to claimants. It was introduced with the aim of simplifying and streamlining the benefits system, improving work incentives, tackling poverty among low income families, and reducing the scope for error and fraud.
Full Service and Live Service describe the computer systems used to deliver Universal Credit.
Rollout of Full Service commenced in certain pilot areas at the end of 2014. All Live Service areas are due to switch to Full Service by September 2018.
People in Full Service areas who started a claim for legacy benefits before Full Service was rolled out are still receiving those legacy benefits. This group of existing claimants will only be moved across to Universal Credit after the rollout of Full Service to all jobcentre areas is complete.
Universal Credit requires a broader span of people to look for work than was the case for legacy benefits.
For example, someone not in work who previously claimed Child Tax Credit or Housing Benefit but not Jobseeker’s Allowance was not required to look for work. This is no longer the case under Universal Credit, subject to certain exceptions.
Similarly, under Universal Credit, the partners of claimants are now required to seek work. Previously, if someone was in employment and claiming tax credits or housing benefits but their partner was not in work (and not claiming Jobseeker’s Allowance), there was no requirement for their partner to look for work. This is no longer the case, subject to an earnings threshold and certain exceptions.
From the point of view of the statistics, this has the effect that more people are brought within the coverage of the claimant count.
The claimant count follows a seasonal pattern. For example, the number of people claiming is affected by factors such as tourism, Christmas and the academic year. Consequently, the Office for National Statistics (ONS) adjusts national and regional data to strip out these seasonal variations, so that the underlying trend in the claimant count can be seen more clearly.
However, in the case of Universal Credit, there is not enough data to judge how seasonal factors affect the number of people claiming since it is still a relatively new benefit. The ONS originally assumed that the number of Universal Credit claimants required to seek work would have a similar seasonal pattern to Jobseeker’s Allowance, but it is now apparent this is not the case.
ONS now believes the seasonally adjusted series may be providing “a misleading representation of changes in the UK labour market. Given the ongoing process of Universal Credit roll-out and future planned expansions, these problems are likely to persist for some time.”
ONS had already designated the claimant count statistics as “experimental” from June 2015 (meaning the statistics are still in development) due to the impact of Universal Credit.
The problem with determining seasonality of the Universal Credit series is of less concern at the constituency level, since at this level we have only ever had non-seasonally adjusted claimant count data. This was also the case before the introduction of Universal Credit in 2013.
If a constituency saw an increase in the claimant count in the latest month, this is not necessarily an impact of Universal Credit. Most constituencies see an increase in the claimant count between January and February (and between December and January) each year due to seasonal effects.
ONS is no longer including the seasonally adjusted claimant count in the PDF version of its monthly UK Labour Market and Regional Labour Market Statistics bulletins. However, data will still be included in online tables published alongside the bulletins on the ONS website.
ONS continues to publish non-seasonally adjusted data for parliamentary constituencies, local authorities and other geographies on the Nomis website.
The Library continues to publish constituency data on our Constituency Profiles intranet site and in our monthly briefing paper, People claiming unemployment benefits by constituency.