Universal Credit - Is It A Subsidy for Bad Employers? - Should The Chancellor Change It

24th November 2025

For years, Universal Credit has been sold as a modernised safety net — a single benefit that smooths the path between unemployment and work, topping up incomes when wages fall short.

But scratch beneath the surface and a harsher truth emerges - Universal Credit is not just a lifeline for struggling families, it is also a subsidy for employers who refuse to pay a living wage.

The Hidden Subsidy
When a worker's pay packet is too small to cover rent, food, and childcare, Universal Credit steps in. On paper, this looks compassionate. In practice, it means taxpayers are footing the bill for corporate stinginess. Instead of businesses being required to pay wages that reflect the cost of living, the state quietly fills the gap. The result?

Employers keep labour costs low, shareholders pocket profits, and the public purse shoulders the burden.

The Human Cost
For families in Caithness and across the Highlands, Universal Credit often feels less like support and more like a trap. Seasonal work, part‑time contracts, and zero‑hours arrangements leave households dependent on UC top‑ups.

The taper rate is the speed at which UC is withdrawn as earnings rise and it ensures that every extra hour worked yields only a fraction of its worth. Hard graft is rewarded with pennies, while the system whispers "Don't expect more."

The Alternative - Pay People Properly
Imagine a different approach. Abolish Universal Credit in its current form and replace it with a bold rise in the minimum wage not a token increase, but a genuine living wage that reflects housing, energy, and food costs.

Suddenly, the responsibility shifts back to employers. Work would pay enough to live on, without the state propping up low pay. Families would gain dignity, independence, and stability. The taxpayer would no longer subsidise corporate profit margins.

The Challenge for Rural Communities
Of course, raising wages sharply would test small businesses, especially in rural Scotland where margins are thin. But here lies the real policy challenge. Support those businesses directly through fair rates, infrastructure, and investment rather than funnelling billions into a benefit system that masks low wages. A strong minimum wage paired with rural business support could break the cycle of dependency without breaking local economies.

The local story
Picture Wick on a winter morning: a shop worker stacking shelves before dawn, knowing her wages won't stretch to the heating bill without a Universal Credit top‑up.

In Thurso, a cafe worker pulls double shifts, only to see UC claw back most of the extra pay. Out on the croft, a farmer balances lambing with part‑time labour, his household budget patched together by UC payments that rise and fall with every hour worked.

Now imagine those same workers under a genuine living wage. The shop worker's pay covers her bills without state subsidy. The cafe worker's extra hours translate into real money in his pocket. The crofter’s seasonal labour pays fairly, without the indignity of waiting for UC adjustments.

The difference is stark with dignity restored, independence regained, and the burden shifted back to employers where it belongs.

Universal Credit has become a subsidy for bad employers. Abolishing it and replacing it with a serious rise in the minimum wage would be a radical but necessary step. For Wick, Thurso, and the crofting communities, it could mean the difference between scraping by on state top‑ups and living securely on fair wages.

Work should pay in Caithness and the wider Highlands and not be propped up by Westminster handouts.

When it started
Universal Credit (UC) was introduced in the UK in 2013, under the Conservative-Liberal Democrat coalition government.

2010-2012
The idea was developed by Iain Duncan Smith, then Secretary of State for Work and Pensions, as part of welfare reform proposals.

2012
The Welfare Reform Act 2012 provided the legal framework for UC.

2013
UC began rolling out in pilot areas, starting in Ashton-under-Lyne (Greater Manchester).

2015 onwards
Gradual national rollout, replacing six existing "legacy benefits" (Income Support, Jobseeker’s Allowance, Employment and Support Allowance, Housing Benefit, Working Tax Credit, and Child Tax Credit).

2019
UC became the default system for new benefit claimants across the UK.

Political Context
Enacted by The Conservative-Liberal Democrat coalition government (2010–2015).

Key architect was Iain Duncan Smith (Conservative), who argued UC would simplify welfare and "make work pay."

From the outset, UC was controversial praised for simplification but criticised for delays, sanctions, and the way it interacts with low wages.