Background An increase in mental health problems and a widening in inequalities has occurred in England during a period of austerity and welfare reform. Universal Credit (UC) was introduced for unemployed people first in the UK in 2013, to simplify the benefit system by bringing six ‘legacy benefits’ together into one means tested benefit. Qualitative research suggested potential negative mental health impacts. We assessed this natural policy experiment, taking advantage of the variation in UC introduction across local authority areas to see whether the introduction of UC was associated with an increase in self-reported psychological distress.

Methods We conducted a difference-in-difference analysis using longitudinal data from the Understanding Society Household Panel Survey on 88,060 working age (16–64) adults who participated between 1991 and 2018. We linked UC data from the DWP by local authority, month and year to identify when UC was introduced in each area. The primary outcome was self-reported psychological distress using the continuous General Health Questinaaire-12 (GHQ-12) measure, with high scores indicating increased psychological distress. We compared the change in mental health of unemployed people after UC was introduced in their local authority area to individuals who were not unemployed, and not effected by UC. Analysis was conducted in STATA-14.2 and accounted for confounding variables such as year, age, sex, having dependents, and marital status.

Results 18% (n=15,847) had a spell of unemployment at some time between 1991 and 2018. 3058 of these were unemployed in an area where UC had been introduced. When UC was introduced in an area the mental health of the unemployed deteriorated, whilst we did not see a deterioration in the mental health of those not unemployed. The trends in mental health in these two groups prior to the introduction of UC were parallel. The difference-in-differences in total GHQ-12 scores showed that the introduction of UC on an area was associated with a rise in psychological distress amongst the unemployed (β=0.27, 95% CI 0.09, 0.45, p=.003) relative to those not unemployed.

Conclusion Our analysis shows that the introduction of UC has led to an increase in psychological distress amongst unemployed individuals. UC has the potential to positively transform the benefit system, however our analysis, alongside the growing body of evidence suggests that in its current form UC has a negative impact on peoples mental health, and actions to address this are needed to help tackle the UK mental health crisis.