Universal Credit ‘tax on workers’ should be cut to help Brits get back to employment, says thinktank


UNIVERSAL credit’s tax on workers should be cut to help struggling Brits back into employment, a new think tank report has said. 

The current system makes it “less worthwhile for claimants to take up employment”, a briefing paper by the Centre for Policy Studies said. 

Workers lose some of their payments when they earn over a certain amount

At present, Universal Credit claimants currently lose 63p of every £1 from their payments over a certain amount due to the taper rate. 

It means Universal Credit payments are reduced if claimants earn over the work allowance, this is over £292 if you get housing support or £512 if you don’t. 

HOAR has been calling for a reduction in the taper rate and increase in the work allowance as part of our Make Universal Credit Work campaign, which this week won a landmark court case.

Sun columnist Nichola Salvato, 49, took the government to court after getting into £2,000 worth of debt trying to pay for childcare.

Meanwhile the Centre for Policy Studies also urged the government to replace the £20 Universal Credit uplift payment with a “Covid hardship payment”. 

Universal Credit claimants were handed the cash boost because of coronavirus but that is set to end soon.

James Heywood, head of welfare and opportunity at the Centre for Policy Studies, said:

“The government has backed themselves into a corner with the £20 uplift in Universal Credit – it’s much harder to take something away once it’s in place.

“However, they do have the opportunity now to make significant changes to the system to benefit claimants and ensure it always pays to work.

“Replacing the uplift with a clearly defined temporary support mechanism, combined with other reforms, would offer the intended financial support while making it easier to prepare claimants for its eventual withdrawal.”

The £20 boost was rolled out as a temporary measure for 12 months due to the pandemic, applying to all new and existing Universal Credit claimants.

It means that for a single Universal Credit claimant, who’s 25 or older, the standard allowance increased from £317.82 to £409.89 per month.

The standard allowance is set at different levels for those who are under 25 or for those who are in a couple.

But MPs have urged the government to carry on giving the extra money as the pandemic continues in to 2021.

Chancellor Rishi Sunak is under pressure to cover the costs of this boost and other coronavirus schemes.

He has privately warned he would be forced to hike fuel duty by five pence per litre to pay for extending the Universal Credit uplift post lockdown.

A government spokesperson said: “We are committed to supporting the lowest-paid families through the pandemic and beyond to ensure that nobody is left behind.

“That’s why we’ve targeted our support to those most in need by raising the living wage, spending hundreds of billions to safeguard jobs, boosting welfare support by billions and introducing the £170m Covid Winter Grant Scheme to help children and families stay warm and well-fed during the coldest months.

“We will continue to assess how best to support the economy.”

Thousands of people claiming Universal Credit will be worse off this month because coronavirus exemptions from the benefit cap start to end.

People struggling can get free cash through the Winter Covid Grant Scheme – here’s how.

The government has confirmed that coronavirus support for the self-employed won’t be announced until the March Budget.