Benefits, pensions and inequality

Words to know

Benefit

Money the government pays to people, for example because of age, illness, low pay or having children.

State pension

A payment to people above a set age, the largest part of benefit spending.

Means-tested

Paid only if your income or savings are below a limit.

Universal Credit

A benefit for people on low incomes, in or out of work, which replaced six older benefits.

Gini index

A score for how unequally income is shared, from 0 to 100.

Real terms

Adjusted for rising prices so years can be compared.

Charts

Benefit spending, year by year

Billions of pounds at today's prices; outturn years only.

Questions

1. Work out[3]

   The UK spent £305bn on benefits and the state pension in 2024-25, of which £174bn went to pensioners. Work out the percentage spent on pensioners. Give your answer to the nearest whole number.

   GCSE Maths · AQA 8300 · Number: percentages of amounts
   Answer. 57%

   M1 for 174 ÷ 305. M1 for × 100. A1 for 57.
2. Calculate[3]

   The number of people on Universal Credit was 2.13 million in 2019-20 and 5.47 million in 2024-25. Calculate the percentage change.

   GCSE Maths · AQA 8300 · Ratio, proportion and rates of change: percentage change
   Answer. +157%

   M1 for 5.47 − 2.13. M1 for ÷ 2.13 × 100. A1 for 157.
3. Calculate[3]

   Spending on benefits and the state pension was £305bn and the UK population was 69.5 million. Work out the mean spending for each person in the UK. Give your answer to the nearest £100.

   GCSE Maths · AQA 8300 · Number: working with large numbers; rates
   Answer. £4,400

   M1 for £305bn = £304,660,000,000 and 69,483,900 people. M1 for dividing. A1 for about £4,385 (£4,400 to the nearest £100).

   Common error: Confusing billions and millions.
4. Write[2]

   Spending on benefits for working-age adults was £126bn and for children £4.8bn. Write the ratio working age : children in the form n : 1 with n to the nearest whole number.

   GCSE Maths · AQA 8300 · Ratio, proportion and rates of change: ratio
   Answer. 26 : 1

   M1 for 126 ÷ 4.8. A1 for 26.
5. Work out[2]

   1.69 million people claimed unemployment-related benefits, 4.4% of people aged 16 to 64. Estimate how many people were aged 16 to 64. Give your answer in millions to 1 decimal place.

   GCSE Maths · AQA 8300 · Number: percentages of amounts
   Answer. 38.4 million

   M1 for 1.69 ÷ 0.044. A1 for 38.4.

   Common error: Multiplying instead of dividing.
6. Explain[2]

   A person can claim more than one benefit. Explain why the caseloads of different benefits cannot be added together to find how many people claim benefits.

   GCSE Citizenship · Understanding data: counts and what they measure
   Answer. People claiming more than one benefit would be counted twice

   B1 one person may appear in several caseloads. B1 so the total would overstate the number of different people.
7. Explain[6]

   Spending on benefits and the state pension was 9.9% of GDP in 2024-25, +0.9 percentage points on 2014-15. Explain two ways in which benefits can reduce income inequality.

   A-level Economics · AQA 7136, Edexcel 9EC0 · Distribution of income and wealth: redistribution
   Answer. Transfers raise low incomes; progressive funding

   Each developed reason: 1 mark to identify, up to 2 to develop (cause and effect, with data). e.g. (1) cash transfers raise the incomes of low-income households, narrowing the gap. (2) means-tested benefits target those most in need. (3) benefits are funded largely from progressive taxes so net transfers go from higher to lower incomes.
8. Analyse[9]

   The UK's Gini index was 32.4 in 2021, and the richest 10% received 25% of income. Analyse what these figures show about inequality, and one limitation of using them.

   A-level Economics · AQA 7136, Edexcel 9EC0 · Poverty and inequality: measuring inequality
   Answer. Gini and decile share measure spread; limitations of survey data

   Levels: L1 (1–3) relevant points, little analysis; L2 (4–6) developed chains of reasoning; L3 (7–9) well-developed analysis, supported by the data, with a clear line of argument. Indicative: Gini from 0 (equality) to 100; a share of 25% for the top tenth against 10% under equality; comparison across countries; limitations — surveys miss top incomes, definitions vary, and neither shows wealth, mobility or who is in each group.
9. Evaluate[15]

   Evaluate whether benefits should be means-tested (paid only to people with low incomes) rather than universal, given UK spending of £305bn (9.9% of GDP).

   A-level Economics · AQA 7136, Edexcel 9EC0 · The role of the state: welfare policy
   Answer. A balanced judgement with criteria

   Levels: L1 (1–3) knowledge, no application; L2 (4–8) analysis of one side, some data; L3 (9–12) two-sided analysis with chains of reasoning and data; L4 (13–15) sustained evaluation with criteria (size, time, context) and a justified conclusion. Indicative: means-testing targets resources, lowers cost per head and reduces inequality; but it creates poverty traps and high marginal rates, stigma, low take-up and administrative cost; universal benefits are simple and popular but costly and give money to those who do not need it; judge on cost, fairness, incentives and take-up.
10. Explain[4]

    Universal Credit caseload was 2.13 million in 2019-20 and 5.47 million in 2024-25. Universal Credit replaced six older benefits over this period. (a) Explain why the rise cannot simply be read as more people in need. [2] (b) Explain what extra information would be needed to compare the periods fairly. [2]

    A-level Mathematics · Statistics: interpreting data (check your board)
    Answer. Definition changed; need a consistent measure

    (a) B1 the new benefit replaced older ones, so people moved across. B1 it also paid some people in work, who were not counted before. (b) B1 the total number claiming any of the older benefits for comparison. B1 the share of the population or of low-income households.

Ideas for discussion

• Should benefits go to everyone who needs them or only to people below an income limit? What are the trade-offs?
• Why might a country spend more on pensions as its population ages? Who pays?
• Does a higher Gini index mean a country is worse off? What else would you want to know?