Universal Credit raised for 1,700,000 people with 8p boost to pay packet
The Government will give working Universal Credit claimants 8p more in every pound they earn, weeks after scrapping a temporary uplift worth £20 a week.
Ministers had repeatedly defending ending the increase – worth more than a £1,000 a year to claimants – despite a cost of living crisis.
But Rishi Sunak confirmed in Wednesday’s budget that some of those on the scheme will be given more money after all.
He said: ‘The Universal Credit taper withdraws support as people work more hours. The rate is currently 63%, so for every extra £1 someone earns, their Universal Credit is reduced by 63p.
‘Let us be in no doubt: this is a tax on work – and a high rate of tax at that.’
But those out of work on the scheme will get nothing extra.
Mr Sunak added: ‘To make sure work pays, and help some of the lowest income families in the country keep more of their hard-earned money, I have decided to cut this rate, not by 1%, not by 2% – but by 8%.’
He said the tax cut would be worth more than £2 billion and would be introduced no later than December 1.
Mr Sunak claimed that the changes mean that nearly two million families will keep on average an extra £1,000 a year – almost exactly the amount he cut when removing the temporary uplift.
He said a single mother-of-two renting and working full time on the national living wage will be better off by around £1,200.
But Labour said struggling families will believe Rishi Sunak is ‘living in a parallel universe’ following his Budget.
Shadow chancellor Rachel Reeves told the Commons that she welcomed the reduction of the Universal Credit taper rate but warned working people receiving the benefit ‘still face a higher marginal tax rate than the Prime Minister’.
‘Those unable to work through no fault of their own still face losing £1,000 a year’, she added.
‘Families struggling with a cost-of-living crisis, businesses hit by a supply chain crisis, those who rely on our schools and hospitals and our police… they won’t recognise the world the Chancellor is describing.
‘They will think he is living in a parallel universe.’
The director of the Institute for Fiscal Studies (IFS), Paul Johnson, tweeted: ‘Big cut to Universal Credit taper. And increase in work allowance. Targeted at working claimants. Out of work UC claimants get nothing.
‘Trade-offs as ever. Improves work incentives for current recipients but will drag more into the system.’
Meanwhile, the minimum wage will rise to £9.50 an hour.
Mr Johnson also contested the Chancellor’s claim the minimum wage increase is worth £1,000 to a full-time worker, stating this is worth £700 after tax and national insurance and ‘less than £300 to anyone on Universal Credit (UC)’.
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Rishi Sunak has announced the largest increase in public spending in a century in a budget that has promised ‘the start of a new post-Covid economy’.
Many of the headline policies include a rise in the national living wage and a pledge to spend billions on the NHS.
Here are the main changes you need to know about:
- Universal Credit raised for 1,700,000 people with 8p boost to pay packet
- Fuel duty will not increase as prices at the pumps hit record high
- Millions of key workers set to be paid more as Rishi Sunak confirms end to pay freeze
- Rishi Sunak promises £150,000,000,000 spending frenzy in Budget statement
- Rishi Sunak confirms increase of national living wage to £9.50 an hour
- Pints of beer cut by 3p and sparkling wine is about to become cheaper
- Families will get £300,000,000 in new ‘Start for Life’ campaign
- Thousands of football pitches will be built to boost 2030 World Cup bid
- Prepare for a pricey Christmas as inflation ‘likely to rise’