Universal Credit rebalancing reforms - PolicyEngine UK documentation

Overview¶

Protected awards for existing claimants: Existing recipients of the health element keep the combined value of their standard allowance and health element at least in line with CPI inflation through 2029-30.
Health element changes for new claimants: New Universal Credit claimants from April 2026 onwards receive a fixed monthly health element amount of £217.26, rather than the protected existing-claimant amount.
Standard allowance uplifts: The standard allowance receives additional uplifts beyond the annual inflationary increase from 2026-2029.

Health element changes¶

From April 2026, new Universal Credit claimants who qualify for the Limited Capability for Work-Related Activity (LCWRA) element receive a fixed monthly amount of £217.26.

Existing recipients are treated differently. Their LCWRA amount is uprated so that the combined value of:

their standard allowance, and
their health element

rises at least in line with CPI inflation. The model implements that protection through the health element itself, preserving the combined award outcome without separately modelling the small administrative split between protected LCWRA amounts and any under-25 standard allowance supplement.

The implementation uses transition probabilities based on WPI Economics analysis for the Trussell Trust, derived from administrative Personal Independence Payment data. The probability of being a new claimant varies by year:

2026: 11%
2027: 13%
2028: 16%
2029: 22%

Standard allowance uplifts¶

The standard allowance receives additional percentage uplifts beyond the normal inflationary increase:

2026: 2.3% additional uplift
2027: 3.1% additional uplift (cumulative)
2028: 4.0% additional uplift (cumulative)
2029: 4.8% additional uplift (cumulative)

These uplifts are applied to the CPI-uprated standard allowance for each year. In other words, the model first applies the usual CPI uprating and then applies the rebalancing uplift on top.

Implementation¶

Parameters: Three YAML files define the reform’s activation status, health element amount for new claimants, and standard allowance uplift rates.
Scenario modifier: The add_universal_credit_reform function applies the protected existing-claimant health-element path during microsimulation.
Scenario: The universal_credit_july_2025_reform scenario enables the reforms in policy analysis.

Examples¶

You can use these reforms in your own analysis by creating a Simulation with parametric changes to modify the reform parameters.

Disabling the rebalancing reforms entirely¶

from policyengine_uk import Simulation, Scenario

# Disable the reforms from 2026 onwards
scenario = Scenario(parameter_changes={
    "gov.dwp.universal_credit.rebalancing.active": False,
})

sim = Simulation(scenario=scenario)

Changing the standard allowance uplift parameters¶

from policyengine_uk import Simulation, Scenario

# Set different uplift rates - e.g. 5% in 2026, 7% in 2027
scenario = Scenario(parameter_changes={
    "gov.dwp.universal_credit.rebalancing.standard_allowance_uplift": {
        "2026-01-01": 0.05,
        "2027-01-01": 0.07,
        "2028-01-01": 0.07,
        "2029-01-01": 0.07
    }
})

sim = Simulation(scenario=scenario)

Changing the health element amount for new claimants¶

from policyengine_uk import Simulation, Scenario

# Set the new claimant health element to £250 per month
scenario = Scenario(parameter_changes={
    "gov.dwp.universal_credit.rebalancing.new_claimant_health_element": {
        "2026-01-01": 250.00
    }
})

sim = Simulation(scenario=scenario)

Legislative reference¶

The reforms are based on the Universal Credit Bill and its impact assessment: