Britain’s welfare bill has climbed into sharper focus after new figures revealed more than eight million people were receiving Universal Credit at the start of 2026, intensifying pressure on the government ahead of October’s Budget.
Department for Work and Pensions figures show that 8.4 million people were claiming Universal Credit in January, up from 7.4 million a year earlier.
The increase highlights the growing scale of the benefit system as ministers attempt to balance support for households with demands to restore control over public finances.
The average Universal Credit household payment stood at £1,030 a month, although the level of support varied significantly depending on personal circumstances. Single claimants without children received an average of £800, while couples with children received the highest average payments at £1,310.
The figures come as Chancellor John Healey prepares to set out Labour’s fiscal plans amid limited room for additional borrowing and warnings over inflation risks linked to the Iran conflict.
The National Institute of Economic and Social Research has cautioned that higher inflation could further restrict the government’s options, with deputy director Stephen Millard arguing that ministers face difficult choices over taxation and spending.
“There’s clearly no scope for increasing borrowing, so it is about choices,” he said, warning that the funding plans behind government support measures needed greater clarity.
Some economists have argued that tax reform may be preferable to further spending reductions, while ministers face political difficulties in reducing welfare expenditure. Previous attempts to cut benefits have triggered major resistance, including the collapse of former prime minister Sir Keir Starmer’s proposed £5 billion welfare reduction after opposition from Labour MPs.
Andy Burnham has since promised a more consultative approach with backbenchers as the government seeks to reform the system without triggering another political revolt.
The latest data also challenges the perception that Universal Credit is solely an unemployment benefit. Around 2.7 million recipients — roughly 32 per cent of claimants — were in work in December 2025, reflecting the role of the scheme in supporting low-income households.
With welfare spending rising and public finances under strain, October’s Budget is set to become a defining test of the government’s ability to manage the competing demands of economic stability, social support and political pressure.
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