Inequitable treatment of Maternity Allowance in calculation of Universal Credit awards
Date Posted: Wednesday 18th November 2020
Dear Secretary of State,
On 4 May, the Child Poverty Action Group, the Fawcett Society, Gingerbread, the Women’s Budget Group and Maternity Action wrote to you, urging you to take urgent steps, as part of the Government’s response to the COVID19 pandemic, to end the current inequitable treatment of Maternity Allowance in the calculation of Universal Credit awards by the DWP.
In that letter, we noted that this unjustified policy anomaly leaves low-‐income mothers in receipt of Maternity Allowance up to £5,000 worse off over nine months of maternity leave, relative to mothers in the same circumstances who qualify for Statutory Maternity Pay (SMP) and apply for Universal Credit. We noted that, in 2019, more than half of the some 60,000 new mothers granted Maternity Allowance also applied for Universal Credit. And we warned that the lockdown was “almost certain” to lead to an increase in the number of women unexpectedly failing to qualify for SMP, and ending up on Maternity Allowance.
On 6 July, in its wide-‐ranging and extensively evidenced report on the impact of COVID19 on maternity and parental leave, the Petitions Committee of MPs concluded that: The unequal treatment of two schemes designed to do the same thing – provide support to new mothers during their maternity leave – is causing real hardship. An Early Day Motion signed by 110 [now 118] MPs from across the House calls for this “anomalous injustice” to be remedied by amending the Universal Credit Regulations 2013. The Secretary of State for Work and Pensions was also asked about it in the House of Commons on the 4 May, and agreed to look into it, but no action has been forthcoming. It should cost only £45 million [per year] to address this anomaly, once Universal Credit has been fully rolled out.
This represents less than 0.07% of the £65.5 billion that the Department for Work and Pensions are forecast to spend on Universal Credit and legacy equivalents in 2020/21. As a matter of urgency the Government should consider whether Maternity Allowance should be considered as earnings in the same way as Statutory Maternity Pay and should not lead to deductions from Universal Credit.
The hardship identified by the Committee is indeed real, and disconcerting, given the Government’s stated commitment to support the least well-‐off during the pandemic. For example: Abigail (not her real name) is a single parent who decided to re-‐train as a teacher after being made redundant from her human resources job in 2018. On top of her full-‐time teacher training, which involved working in a school on a bursary, Abigail took on work in a restaurant in the evenings and weekends. Then, having become pregnant in December 2018, Abigail claimed and was granted Maternity Allowance of £148.68 per week (£644.28 per month) from August 2019.
As her outgoings had increased following the birth of her baby, Abigail also applied for Universal Credit. The DWP calculated Abigail’s Universal Credit award to be £826.57 per month, but then deducted her Maternity Allowance pound for pound from that sum, reducing the award to just £182.29 per month. At that point, Abigail sought advice from Maternity Action, and her MP. Had Abigail been able to work more hours and so qualify for Statutory Maternity Pay (SMP) of £644.28 per month (i.e. the same rate as Maternity Allowance), all but £89.00 of that SMP would have been disregarded by the DWP under the Work Allowance and 63% excess earnings taper rate, and her Universal Credit award would have been £737.57 per month.
In short, because she was on Maternity Allowance, Abigail and her two young children were £555.28 per month worse off than if she had been on SMP. Over 39 weeks of maternity leave, that is a total difference of £4,997.52. Accordingly, and not withstanding the High Court’s recent ruling in Moore v Secretary of State for Work & Pensions  EWHC 2827 (Admin), we urge you to reconsider your position on this issue, and urgently amend the Universal Credit Regulations 2013 in line with the Petition Committee’s recommendation, so that Maternity Allowance is treated in the same way as SMP in the calculation of Universal Credit awards, with claimants on Maternity Allowance benefiting from the Work Allowance and 63% earnings taper rate.
We are copying this letter to the Chancellor, to Liz Truss, in her capacity as Minister for Equalities, and to the Chairs of the Petitions, Women & Equalities, and Work & Pensions Committees of MPs.
Rosalind Bragg – Director, Maternity Action
Sam Smethers – Chief Executive, Fawcett Society
Victoria Benson- Chief Executive, Gingerbread
Angela McConville – Chief Executive, NCT
Dr Mary-Ann Stephenson- Director, Women’s Budget Group
Jane Van Zyl- Director, Chief Executive, Working Families