Politics

Sunak announces support for working universal credit claimants in Budget speech

The chancellor ignored calls to reinstate the £20-per-week universal credit increase, letting working claimants keep more of their pay instead.

Rishi Sunak, who is making universal credit changes, making an announcement with a union flag behind him

Sunak will change the universal credit taper rate, which currently takes 63p from every £1 a claimant earns. Image: Number 10/Pippa Fowles

Rishi Sunak has announced support for universal credit claimants with jobs in his Budget.

Workers claiming the benefit will be able to keep more of their wages after the chancellor cut the “taper rate” – but campaigners warned it does little to help the two million claimants out of work due to sickness, disability or caring duties.

Employed people on universal credit – around 40 per cent of all claimants – currently have 63p taken from their benefit payments for every £1 they earn at work, keeping 37p. Campaigners have long criticised the policy for pushing low-paid workers deeper into poverty and penalising those who take on more hours or find better-paying jobs.

Now, workers will keep 45p from every £1 they earn, an increase of 8p, and the change will be introduced “no later than December 1”. This brings the taper rate in line with what was originally envisaged when the benefit was introduced in 2013 and, after sources claimed the rate would only decrease by three per cent, was one of the biggest surprises of Sunak’s Budget announcement.

But it does little to dispel fears over how low-income families will cope in the coming months after universal credit was cut by £20-per-week for the benefit’s 5.2 million claimants amid a cost of living crisis, experts warned.

Despite widespread calls to reinstate the £20-per-week increase, Sunak instead kept spending changes tied to wages by coupling the taper rate change with an increase in the minimum wage.

Speaking in the House of Commons, Sunak said the government was creating “a society that rewards work”.

“For many of the lowest paid in society there is a hidden tax on work,” he said, announcing the taper rate change. “Let us be in no doubt, this is a tax on work and a high rate on tax at that.”

Reversing the universal credit cut would cost the government around £6bn per year. The change in taper rate will cost £2bn, Sunak said.

The chancellor also confirmed a rise in the national living wage (NLW) – the legal minimum wage for workers aged 23 and over – to £9.50, a 6.6 per cent increase.

Rachel Reeves, Labour’s shadow chancellor, said Sunak was “expecting [low income households] to cheer” for the announcement worth £2bn just weeks after the government cut spending on universal credit by £6bn.

The chancellor is “loading the burden” of public spending costs on working people, Reeves said.

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