Thomas Bridge 23 November 2016

Autumn Statement: Hammond ‘reinforces’ Universal Credit with benefit tweaks

Phillip Hammond has announced an overhaul of the speed at which benefits are withdrawn under Universal Credit.

Delivering his Autumn Statement, the chancellor revealed that from April 2017 the rate at which benefits are reduced as a claimant earns more would fall from 65% of payments to 63% - meaning 63p would be withdrawn for every pound of net earnings.

Mr Hammond said the Government wanted to ‘reinforce’ the system of combined benefits ‘to make sure that work always pays’.

He said measures announced today marked an ‘effective targeted tax cut worth £700m per year by 2021/22 for those in work on low incomes’ and would increase work incentives for three million families.

The chancellor added there were ‘no plans to introduce further welfare savings in this parliament’ beyond those previously announced by former chancellor George Osborne.

Despite the reforms announced in today’s Autumn Statement, the Universal Credit taper rate is still far higher than the original 55% figure originally planned. The Resolution Foundation has said a fall to around 35% would be needed to reverse the full impact of welfare reduction.

The Resolution Foundation has argued a U-turn on reductions to work allowances pencilled in for Universal Credit would be one of the Government’s best routes to supporting ‘just about managing’ families, a group of low to middle earners that took centre stage in the Chancellor’s speech.

Speaking ahead of the Autumn Statement, Resolution Foundation director Torsten Bell said: ‘When it comes to boosting just managing family budgets all roads lead to Universal Credit. The most effective way to support families would be by reversing the £3bn cut to work allowances announced by the last chancellor.’

He said many families would gain no more than £200 from the much-trailed cut in the taper rate, which he described as ‘small fry when set against losses from work allowance cuts of up to £2,800’.

‘This move falls well short of the rhetoric that just managing families have heard in recent months – giving them no jam tomorrow, let alone jam today,’ Mr Bell said.

Labour claimed changes to the taper rate would see certain working families seeing only £150 returned from original yearly losses of £2,500 through cuts under Universal Credit.

Ahead of the Autumn Statement, Labour’s shadow chancellor John McDonnell said: ‘It appears that Philip Hammond not only takes with one hand, he now pretends to give back with the other.’

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