Report

The hidden benefits bill

This report from UK think tank Onward calls for a fundamental rationalisation of passported benefits as the UC rollout nears completion.

The Hidden Benefits Bill argues that the true cost of the UK’s working-age welfare system is significantly higher than headline Universal Credit (UC) spending figures suggest, because of a large and growing set of ‘passported’ benefits that sit alongside UC. These include free school meals, free prescriptions, council tax reduction, the Warm Home Discount, WaterSure, broadband social tariffs, childcare support and a range of discretionary local authority schemes.

Drawing these together for the first time, Onward estimates that these additional benefits are worth over £10 billion a year to UC claimants. Many of these schemes were designed for legacy benefits and have continued in parallel as UC rollout has dragged on, creating a fragmented system that is poorly understood, unevenly administered, and largely absent from public debate about welfare spending and poverty.

The report argues that this complex web of passported benefits undermines the original policy intent of Universal Credit: to create a simple, transparent system that always makes work pay. Because many passported benefits are fixed-value and withdrawn abruptly, rather than tapered with earnings, they can generate sharp cliff edges when claimants move into work or increase their hours, weakening work incentives and trapping households on benefits.

Onward concludes that the current system also obscures the real distributional effects of welfare policy and shifts costs onto taxpayers, bill-payers and non-claimants. It calls for a fundamental rationalisation of passported benefits, including integrating them more directly into UC, simplifying eligibility rules, reducing cliff edges, and restoring clarity and coherence to the welfare system as UC rollout nears completion.