Universal Credit fury: Rishi Sunaks boost will be cancelled out by inflation

Budget 2021: Sunak announces Universal Credit taper cut

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The Chancellor of the Exchequer announced today reforms to Universal Credit which would see an extra £2billion given allocated to recipients across the country. Earlier this month the government scrapped the £20-a-week uplift, which was brought in during the pandemic to help struggling families. But the removal of the extra cash proved to be controversial, with Manchester United footballer Marcus Rashford among the most prominent voices calling for the uplift to be maintained. Mr Sunak said today that the taper rate in Universal Credit will be adjusted so that the amount of benefit a worker will lose for every pound they earn above their worker allowance will be reduced to 55p in the pound from 63p currently.

He added that the change will come into place no later than December 1.

However, Nimesh Shah of Blick Rothenberg tells Express.co.uk that this measure won’t be enough to counteract rising inflation in the UK.

He said: “It’s difficult to put a number on it, but the Government has said today that inflation is targeted at four percent next year, which is significant.

“With the changes to Universal Credit and the increase in the living wage, you’ll do well for the two of them to net off against inflation – for a neutral impact.

“I don’t think this represents any sort of give away from the Government. No one really knows how the inflationary aspect will turn out, but the economics are suggesting we will see significant inflation over the next 12 months.

“I don’t think the changes that have been announced will temper that. I think working families have got a tough winter ahead.

“Everyone is still going to be losing £20 a week. That is a fact, we know that. That is something that Rishi Sunk was adamant was going to happen, and it will leave people worse off.”

The minimum wage will be increased to £9.50, the Chancellor confirmed today.

Ministers have accepted the Low Pay Commission’s recommendation for a 6.6 percent increase from £8.91, which applies to workers aged 23 and over.

For those aged 21 to 22, the minimum will increase from £8.36 to £9.18.

Mr Sunak said the increase “ensures we’re making work pay and keeps us on track to meet our target to end low pay by the end of this parliament.”

But the Labour Party challenged this today.

Bridget Phillipson, the shadow chief secretary to the Treasury, said: “This underwhelming offer works out at £1,000 a year less than Labour’s existing plans for a minimum wage of at least £10 per hour for people working full-time.

“Much of it will be swallowed up by the government’s tax rises, universal credit cuts and failure to get a grip on energy bills.”

The TUC (Trade Union Congress) said the increase was vital but not enough to offset the rising cost of living.

Frances O’Grady, its general secretary, said: “The government must set its sights higher. We need a £10 minimum wage now, and we need ministers to cancel the cut to Universal Credit.

“This increase won’t come into effect until next spring by which time many household budgets will have been hammered by rising bills and the universal credit cut.”

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Earlier this week, the Institute for Fiscal Studies warned the minimum wage increase won’t offset the cut to Universal Credit.

Nye Cominetti, an economist at the progressive Resolution Foundation think tank, also told iNews: “A rise in the National Living Wage to £9.50 would be very welcome – especially given that low earners have been the hardest hit by the crisis, both by job loss and reduced hours, and through the direct health consequences of Covid-19.

“However, the high headline increase would in fact be a smaller real rise than some recent years, given that inflation is likely to be over 4 percent by April 2022.”

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