Chancellor Rishi Sunak is reportedly due to cut the Universal Credit taper rate from 63p to 60p – but it still won’t reverse the cut for millions of people on the benefit
Image: Simon Walker HM Treasury)
Speculation is mounting that changes to Universal Credit will be announced in today’s Budget.
Rishi Sunak has reportedly accepted pleas to cut the taper rate – the amount of UC withdrawn for every pound someone earns – from 63p to 60p.
Sources were unable to confirm the taper rate will definitely be changed, describing it as “speculation”.
But Mr Sunak is said to have accepted the idea – reported by the Mirror last month – according to newspaper reports.
It would mean up to 2.3million working benefit claimants would keep 40p, rather than 37p, of every extra pound they earn through work.
Together with a 59p rise in minimum wage, that could just about make up for the £20-a-week cut for some people on full-time minimum wage.
Simon Walker HM Treasury)
But the £20 cut will not be reversed and millions on Universal Credit – including all people who cannot work due to illness – will still be worse off.
And a taper rate change to 60p would still be less generous than the 55p originally suggested by the benefit’s architect Iain Duncan Smith.
Action for Children director Imran Hussain tweeted: “Will the Budget reduce the Universal Credit taper? Definitely maybe
“Would reducing the taper make up for £1040pa cut to Universal Credit? Definitely not.”
The Centre for Social Justice think tank added: “We advocated for 55p, but it’s a positive start.
“Of course, it only benefits those getting back to work.”
Mayor of Greater Manchester Andy Burnham said he hoped the move would be the “rabbit out of the hat” in the Budget statement.
He told the BBC : “I’m hearing they are about to U-turn on Universal Credit and actually that is a credit to the Labour Party that’s campaigned on that particular issue and I hope that is the rabbit that’s in his hat today.
“We’re hearing there’s going to be a change 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.”
It’s thought Mr Burnham learned of the plan by reading press reports.
Former Housing Secretary Robert Jenrick told LBC Radio: “It seems to me to be a very sensible step.
“Universal Credit is designed to make work pay, so if somebody takes on some extra hours, they get to keep as much of that as possible and at the moment, you see tax rates that mean that… taper rates that means you lose as much as 60% and that doesn’t seem sensible.
“So I think that’s an attractive option to the Chancellor, which targets money at the people who need it the most and helps to incentivise work which must be at the core of what we as Conservatives believe.”
There are 5.8million people on Universal Credit as of August 2021, 2.3million of whom are in work.
That means 2.5million people will not benefit at all from changes to the taper rate.
And not all 2.3million people in work will benefit either, because some of them have a “work allowance” that allows them to earn a certain amount before the taper rate kicks in.
Claimants with children or limited capability for work can earn £293 a month (£515 if they don’t get housing support) before the taper is activated.
DWP ministers had been lobbying Mr Sunak to cut the taper from 63p to 60p after they lost the argument about stopping the £20 cut.
The £1bn a year move would be the first taper change in five years, and would partially cushion the blow of the £20-a-week cut.
Our rough maths suggests a 25-year-old single person working 40 hours a week on the new minimum wage could be £9.81 a week better off due to a taper cut.
Also factoring in the minimum wage rise – and the new higher rate of National Insurance – could take the total weekly increase to about £23.81.
But because UC has been cut by £20 across the board, that would only make them £3.81 a week better off overall compared to September 2021.
And this rough calculation only applies to people full time on the minimum wage.
People with wages already slightly above the minimum may not get a rise in pay. And those on shorter hours see less benefit from a pay increase.