Source · Select Committees · Women and Equalities Committee
Recommendation 32
32
Deferred
Reclassify Maternity Allowance as earned income for Universal Credit to support self-employed women.
Recommendation
The Department for Work and Pensions should review funding for Universal Credit and reclassify Maternity Allowance so that it is not treated as “unearned income” for the purposes of Universal Credit, so that when self-employed women access it, their Universal Credit is not reduced. (Recommendation, Paragraph 128)
Government Response Summary
The government deferred the recommendation to reclassify Maternity Allowance for Universal Credit purposes, stating it is within the scope of the Parental Leave and Pay review. The response also explained that Maternity Allowance is currently treated as unearned income due to the means-tested nature of Universal Credit, a policy upheld by court judgments.
Government Response
Deferred
HM Government
Deferred
Universal Credit is a means-tested system of support, and where an individual claims Universal Credit, their award is adjusted to take account of other financial support that the customer is receiving – including earnings, other income and benefits. Maternity Allowance is a benefit paid by the State and is classed as unearned income for Universal Credit purposes. Unearned income that is available to help meet daily living costs is taken fully into account in determining the amount of Universal Credit that an individual is entitled to. As such, in determining the entitlement to Universal Credit, Maternity Allowance is deducted pound for pound from the total value of the award. This principle applies to other benefits: for example, the same approach is applied to new style Jobseeker’s Allowance and new style Employment and Support Allowance. The High Court judgment in 2020 upheld the policy of treating SMP paid by employers as earnings as well as the treatment of Maternity Allowance. A subsequent joint Northern Ireland court judgement in 2022 also upheld the treatment of Maternity Allowance as unearned income in Universal Credit. Maternity Allowance is in scope of the Parental Leave and Pay review.