Tories in secret talks to raise Universal Credit for 2.3million Brits – weeks after cut

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There are ‘live discussions’ ahead of the October 27 Budget about cutting the taper rate – which could hand back around £9 a week to a worker on minimum wage

Shamed Tory ministers have launched private talks about raising Universal Credit for 2.3million Brits – weeks after cutting it by £20.

The Mirror understands there are “live discussions” inside the Department for Work and Pensions (DWP) about changing the “taper rate” to let working families keep more money.

A proposal under discussion would see the taper – which is the amount of Universal Credit withdrawn for every pound someone earns – cut from 63p to 60p.

Sources say the DWP is lobbying the Treasury to improve the rate as part of Chancellor Rishi Sunak’s October 27 Budget. The Treasury is said to be exploring the idea.

It would be the first taper change in five years, and would partially cushion the blow of the £20-a-week cut – which kicks into payments between October 13 and November 12.

Scroll down for an explanation of what this all means. Are you struggling on Universal Credit? E-mail webnews@mirror.co.uk.

The £1billion-a-year move would leave many working benefit claimants 40p better off, rather than the current 37p, for every pound they earn after tax.

But sources are downbeat about whether Mr Sunak – who is demanding Whitehall cuts ahead of his Spending Review – will authorise the move.

Mr Sunak has already stonewalled pleas to stop the £20-a-week cut, which will save him £5bn-a-year but throw hundreds of thousands of families into poverty.

Even if a 3p change in the taper is approved, it will not come close to making up for the £20-a-week cut for most families.

A 25-year-old single mum working 40 hours a week on minimum wage could be £9.39 a week better off if the taper rate was cut from 63p to 60p.

But because UC is being cut by £20 across the board, she would still be £10.61 worse off than she is now.

And those still covered by work allowances, or too sick to work, would not benefit at all from changes to the taper.

Karl Handscomb of the Resolution Foundation think tank said: “Reducing the taper rate in Universal Credit would raise incentives for workers to earn more – and boost living standards by allowing them to keep more of their earnings.

“But while welcome, this is no alternative to maintaining the £20 a week uplift to Universal Credit.

“The gains are far smaller than the £20 a week cut, and would flow to better off families on UC while three million families would gain nothing at all.

“Virtually all households would still be significantly worse off overall.”

Work and Pensions Secretary Therese Coffey was blasted for claiming families could work an extra two hours to make up for the £20 cut. Experts said many would have to work six hours due to the taper – or nine hours if they pay tax and national insurance.

A person with knowledge of the talks told the Mirror there is now no hope of reversing the £20-a-week cut.

Focus is turning to the taper instead, they said, adding: “It may be that they say the cut is going ahead – but here’s a lollipop”.

A second source said cutting the taper would help push claimants towards working more hours – as Ms Coffey suggested.

After job vacancies topped a million, the source said: “When the economy’s growing and there are lots of job vacancies, more money should go into the taper rate because when people start work they keep more of their money. It’s an incentive.”

Every penny cut from the taper would cost £350million a year once Universal Credit is fully rolled out, the IFS think tank says.

Some 2.3million out of 5.8million claimants have a job, and could benefit from a cut in the taper.

Not all would benefit as some are already spared the taper, due to having a work allowance and earnings under £293 a month.

UC’s architect Iain Duncan Smith, who has demanded ministers halt the £20 cut, originally wanted the taper to be 55p but was overruled by George Osborne.

Mr Duncan Smith appeared to reveal talks about the taper were under way in a Commons debate this week. He urged Ms Coffey to use his bid to stop the cut “as justification for her negotiations with the Treasury to secure a better investment in the taper.”

Labour announced last month it would cut the taper, but has not said what the new taper should be.

Shadow Work and Pensions Secretary Jonathan Reynolds told the Mirror: “Rising food costs, tax hikes, the energy crisis and cuts to Universal Credit are a perfect storm facing working families. It’s not too late for the Government to change course and cancel their cut.

“Labour is on the side of working people, that’s why we would maintain the uplift and reduce the taper rate to allow people to keep more of the money they earn when we replace Universal Credit.”

The Lords Economic Committee called last year for a cut in the taper, saying the poorest in society were being hit with a “very high effective tax rate”.

The committee, led by Tory former employment minister Lord Forsyth, said: “The principle of always making work pay has been undermined by cuts.”

What is the taper rate in Universal Credit?

Universal Credit allows people to keep claiming even if they get a job, because some jobs pay so badly that the wage is not enough to sustain a family.

If you earn money from a job while on UC, your benefits are “tapered” away by a set amount depending on how much you’ve earned after tax.

For every £1 you earn over a set threshold, your benefits are reduced by 63p. That means effectively you’re only 37p better off for every £1 you earn after tax.

The taper is designed to ‘make work pay’ – to smooth people off UC as they re-enter the world of work without abandoning them completely.

But critics and charities have long said the taper is just too high. It leaves too little incentive to get a job because people need 6-9 hours just to make £20.

The taper doesn’t apply to earnings that you make under a “work allowance” – £293 a month if you get housing help, and £515 a month if you don’t.

However, only some claimants are eligible for a work allowance – in other words, if they have responsibility for a child or limited capability for work.

Even those who are eligible will tip over the work allowance and into the taper if they work just eight hours a week at minimum wage.