Rishi Sunak is planning to soften the blow of his cuts to Universal Credit by tweaking the benefits system, according to reports.
The chancellor is expected to change the so-called “taper rate” for claimants in work – a move which would let them keep more of their wages.
But the £20 a week cut is still expected to go ahead – and charities warn that tweaking the taper will not help the poorest.
Under plans reported by The Sun newspaper Mr Sunak would change the taper rate from 63p to 60p – a change which would still fall short of some Tory MPs’ demands to cut it to 55p.
But while 5.5m families are to be hit by the £1,040 a year, £20 a week cut, just 1.7m families will benefit from tweaking the taper by 3p.
And it would help families who do benefit by an average just £5.60 a week, according to calculations by the Joseph Rowntree Foundation – well short of reversing the headline cut.
And even those in work may not benefit from the change – as around 400,000 working families claiming Universal Credit do not earn enough to be impacted by the taper.
The taper rate is the amount of Universal Credit payments people lose as they earn more above a certain amount, known as the work allowance. A lower taper lets people keep more of the money they earn before their benefits are withdrawn.
Speaking on Wednesday morning ahead of the budget, Greater Manchester mayor Andy Burnham told the BBC: “On the rabbit out of the hat, I’m hearing that they are about to U-turn on Universal Credit. And actually, that is a credit to the Labour Party that’s that’s campaigned on that particular issue. And I hope that is the rabbit that’s in his hat today.
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“We’re hearing that there’s going to be a change particularly for those on Universal Credit in work. If he’s going to do that, it’s the right thing to do. This pandemic is not over, people are still feeling its impact. But credit to those who’ve campaigned particularly those in the Labour front bench who’ve been consistent on this point.”
The chancellor is expected to have significantly more headroom to meet his self-imposed spending targets, because of a more rapid economic recovery from Covid than had been expected.
But he is thought to have resisted demands to entirely scrap his planned £20 a week cut to the government’s flagship benefits system.
Research by conservative think-tank the Legatum Institute found that ending the £20 uplift to Universal Credit would plunge 840,000 people into poverty, including almost 300,000 children.
