Universal Credit Bill: HL Bill 123 of 2024–25

Approximate read time: 30 minutes

The bill would increase the universal credit (UC) standard allowance above the rate of consumer price index (CPI) inflation each year from 2026/27 to 2029/30. The bill would reduce the UC health element for new claimants from 6 April 2026 and then freeze the rate from 2027/28 to 2029/30. The bill would also introduce financial protections for all existing UC claimants and some new claimants with the most severe or terminal health conditions. The bill would make similar changes to the rates of income-related employment and support allowance.

The bill as originally introduced in the House of Commons would have implemented two changes to the benefits system announced in the government’s ‘Pathways to work’ green paper (March 2025). The government said it would increase the UC standard allowance and decrease and then freeze the additional health element for existing and new claimants. The green paper also included proposals to tighten the eligibility criteria for the personal independence payment (PIP), which is paid to disabled people to help with the extra costs of living with a disability.

After the bill’s introduction in the House of Commons, the bill faced significant opposition from backbench Labour MPs. In response, the government announced the UC health element for existing claimants would continue to be increased in line with inflation. It then committed to remove the clause in the bill related to PIP following opposition to the policy from Labour backbench MPs and other parties during second reading. These changes were made to the bill during committee stage on 9 July 2025. The bill passed third reading in the Commons by 336 votes to 242. 47 Labour MPs voted against third reading, along with all opposition parties.

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