Can Reform Save £6bn by Taking Away Universal Credit from Foreigners?

Reform UK’s latest cost-cutting proposal to end Universal Credit (UC) for foreign nationals has sparked debate over both its feasibility and legal implications. The party claims that “foreign nationals receive around £8bn a year in UC,” and that eliminating these benefits would save £6bn in the current fiscal year, even after implementing a three-month transition period.

Government data supports part of Reform’s assertion. Between 2022 and 2024, the Department for Work and Pensions disbursed an average of £8.1bn annually in Universal Credit to nationals from outside the Common Travel Area (CTA), which comprises the UK, Republic of Ireland, Channel Islands, and Isle of Man.

However, Reform’s proposal faces significant legal hurdles, particularly regarding EU nationals living in the UK. The plan directly conflicts with the Withdrawal Agreement signed when Britain left the European Union. This international treaty established reciprocal rights allowing EU citizens to access UK benefits while British expatriates can claim similar support in EU countries.

Of the 1.3 million non-CTA nationals receiving Universal Credit as of September 2023, nearly 60% (755,000 people) are protected under the EU settlement scheme. Almost half of these recipients—46%, or 351,000 individuals—are employed but earn low enough wages to qualify for Universal Credit as a supplement to their income.

When questioned about the conflict with the Withdrawal Agreement during a recent press conference, Reform’s head of policy Zia Yusuf acknowledged the issue, stating “we actually need to renegotiate this.” Party leader Nigel Farage expanded on this position, suggesting that “the whole relationship with the European Union needs renegotiating.”

Such renegotiation would represent a substantial diplomatic challenge. The Withdrawal Agreement is a binding international treaty, and unilateral changes could damage the UK’s reputation for honoring its commitments and potentially trigger retaliatory measures affecting British citizens living throughout Europe.

Economic experts have raised concerns about the broader implications of Reform’s proposal. Removing benefits from working EU nationals could create labor shortages in sectors where many Europeans work in low-paid positions, such as hospitality, agriculture, and healthcare support roles. These industries already face recruitment challenges post-Brexit.

Social policy analysts point out that many benefit recipients are actively contributing to the UK economy through taxes and consumer spending. Universal Credit often serves as a wage supplement for those in lower-paid employment, rather than representing full dependency on the state.

The proposal also raises questions about potential impacts on public services. If significant numbers of working families lose support and face financial hardship, this could increase pressure on emergency housing services, food banks, and healthcare.

Reform’s policy reflects the party’s broader platform of reducing immigration and cutting public spending. However, critics argue that implementing such changes would require not only renegotiating international agreements but also developing new domestic legislation to determine which foreign nationals might remain eligible for benefits under any revised system.

As the debate continues, both legal experts and economists will be watching closely to see whether Reform provides more details on how they would address the complex web of international obligations and practical economic realities involved in implementing such a significant policy shift.