Extension for £20 Universal Credit rise
A six-month extension to the £20-a-week Universal Credit increase will be announced in the Budget next Wednesday, The Daily Telegraph understands. The Prime Minister, Chancellor and Work and Pensions Secretary have agreed on the issue following tense negotiations and pressure from backbenchers for a lengthier commitment. The rise, which costs £6 billion a year and was tabled as a time-limited measure, was due to expire at the end of March.
A SIX-MONTH extension to the £20-a-week Universal Credit increase will be announced in the Budget, The Daily Telegraph understands.
The Prime Minister, Chancellor and Work and Pensions Secretary have agreed on the issue following tense negotiations and pressure from backbenchers for a lengthier commitment. The extra £20 a week for claimants of Universal Credit, which wraps legacy welfare schemes into a single payment, was introduced last year to help six million families during the pandemic.
But the rise, which costs £6billion a year, was due to expire at the end of next month, prompting calls from Tory MPS, Labour and campaigners for an extension.
A Government source said last night: “This was a temporary increase to deal with the crisis and has done that job. So it makes sense to continue it as we reopen, but supporting people into jobs will be the priority come the autumn.”
Rishi Sunak has told MPS he wants to prioritise financial help for job support rather than welfare, in the longer term. It is set to be a Budget themed around “jobs, jobs, jobs”, according to insiders.
He is understood to have agreed to the half-year continuation after the Treasury initially examined a rival proposal to offer a one-off payment of £500 to recipients. The idea was met with a poor response from MPS. Mr Sunak also rejected the demand made by dozens of Tory backbenchers to agree to a yearlong extension of the increase.
Some 40 backbenchers wrote to Mr Sunak and Boris Johnson earlier this month, suggesting that a half-year continuation was too short and “would only push the cliff-edge out by a few months”, according to one signatory.
However, Mr Sunak had warned MPS that drastic measures could be needed to foot such a bill, which he had suggested could include a rise in fuel duty or income tax.
Many MPS believe he has decided to defer decisions about a series of major tax rises because of the pandemic and will present a “slim” Budget. A second Budget is then expected in November, with the recovery under way.
Reports last night suggested Mr Sunak will retain the fuel duty freeze and extend VAT cuts for the hospitality and tourism sectors. He is also faces calls to consider high street vouchers for shoppers and lower alcohol duty for restaurants and pubs hit by Covid-19.
A number of revenue-saving and raising measures have been touted for next Wednesday.
The Treasury has examined proposals to freeze personal income tax allowances in order to raise up to £6 billion.
An increase in corporation tax, which is currently levied at 19 per cent, has also been tipped. While many business groups expected an increase of up to 23 per cent – still lower than the 23.5 per cent average across the 37 states in the OECD – The Financial Times reported last night that the Treasury was considering a leap to 25 per cent.
This would allow Mr Sunak to say UK corporation tax was still the lowest rate within the G7, and therefore that the nation remained competitive.