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

Published: 0:01, 24 Jan 2021
Updated: 9:57, 24 Jan 2021

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 amountCredit: PA:Press Association

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.

The Sun 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".

The Sun wants to Make Universal Credit Work

UNIVERSAL Credit replaces six benefits with a single monthly payment.

By the time the system is fully rolled out in 2023, nearly 7million will be on it.

But there are big problems with the flagship system - it takes five weeks to get the first payment and it could leave some families worse off by thousands of pounds a year.

And while working families can claim back up to 85% of their childcare costs, they must find the money to pay for childcare upfront - we’ve heard of families waiting up to six months for the money.

Working parents across the country told us they’ve been unable to take on more hours - or have even turned down better paid jobs or more hours because of the amount they get their benefits cut.

It’s time to Make Universal Credit work. Since December 2018, we've been calling for the government to:

Get paid faster: The government must slash the time Brits wait for their first Universal Credit payments from five to two weeks, helping stop millions from being pushed into debt.
Keep more of what you earn: The work allowance should be increased and the taper rate should be slashed from from 63p to 50p, helping at least 4million families.
Don’t get punished for having a family: Parents should get the 85% of the money they can claim for childcare upfront instead of being paid in arrears.

Together, these changes will help Make Universal Credit Work.

Join our Universal Credit Facebook group or email UniversalCredit@the-sun.co.uk to share your story.

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.

What to do if you have problems claiming Universal Credit

IF you're experiencing trouble applying for your Universal Credit, or the payments just don't cover costs, here are your options:

Apply for an advance - Claimants are able to get some cash within five days rather than waiting weeks for their first payment. But it's a loan which means the repayments will be automatically deducted from your future Universal Credit payout.
Alternative Payment Arrangements - If you're falling behind on rent, you or your landlord may be able to apply for an APA which will get your payment sent directly to your landlord. You might also be able to change your payments to get them more frequently, or you can split the payments if you're part of a couple.
Budgeting Advance - You may be able to get help from the Government for emergency household costs of up to £348 if you're single, £464 if you're part of a couple or £812 if you have children. These are only in cases like your cooker breaking down or for help getting a job. You'll have to repay the advance through your regular Universal Credit payments. You'll still have to repay the loan, even if you stop claiming for Universal Credit.
Cut your Council Tax - You might be able to get a discount on your Council Tax by applying for a Council Tax Reduction. Alternatively, you might be entitled to Discretionary Housing Payments to help cover your rent.
Foodbanks - If you're really hard up and struggling to buy food and toiletries, you can find your local foodbank who will provide you with help for free. You can find your nearest one on the Trussell Trust website.

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.”