Philip Hammond is mulling whether to cave in to Tory pressure and cancel a planned increase in the income tax allowances in order to reverse cuts to welfare previously made by George Osborne.
This would delay or scrap a planned tax cut for low earners – costing every taxpayer extra.
The Tories promised to increase the level at which workers start paying tax from £11,850 to £12,500 by 2020.
And the higher income tax threshold is set to rise from £46,351 to £50,000 over the same period, pledges made in the Tory manifesto.
The Daily Telegraph says the money gained from putting off the tax cut would be ploughed into the Government's troubled welfare programme, Universal Credit.
Treasury sources said the report was speculation.
Yesterday Work and Pensions Secretary Esther McVey admitted that some Brits WOULD be worse off under the new system.
And both Sir John Major and Gordon Brown have spoken out against the new scheme this week, warning it could spark disturbances on the streets, and unrest as bad as the poll tax.
Iain Duncan Smith, the architect of the Universal Credit project, suggested yesterday that ministers reverse the planned £2billion of cuts made to the welfare budget, which were made by ex-Chancellor Mr Osborne in 2015.
He told The Sun last night: "Universal Credit as it stands is working well, rolling out well.
“But we should direct the money back into Universal Credit exactly as it was originally planned to be rolled out."
Some of the poorest Brits are set to lose out as they get transferred onto the new system from next summer.
But around 700,000 will get an extra £4,000 a year as the new system will be able to tell if they are eligible for more.
Put £2bn back into Universal Credit or Brits will lose £50 a week after Brexit, Chancellor told
PHILIP HAMMOND was last night urged to put £2 billion “back into Universal Credit” or see millions of Brits lose £50 a week – immediately after Brexit.
The Joseph Rowntree Foundation (JRF) charity demanded the Chancellor take action in the upcoming Budget to help some of the poorest families in the country.
It came after Work and Pensions Secretary Esther McVey flatly contradicted Downing Street and said people would be “worse off” under Universal Credit.
JRF claims the £2 billion taken out of UC by former Chancellor George Osborne in 2015 will leave an estimated 3.2 million households £50 a week worse off than under the old tax credits regime.
The first payments are expected to come just days after Brexit on March 29 at the start of the 2019-2020 financial year.
JRF said the Government’s £3 billion-worth of transitional relief – for claimants migrating onto UC as the scheme expands next year – will not be enough to make up the difference.
The transitional relief is spread over three years and is axed the moment a claimants circumstances change.
Campbell Robb, JRF chief exec, stormed: “As Britain prepares for Brexit, we need to make sure working families have a firm foundation from which they can build a better life.
“Reforming Universal Credit by increasing the work allowances for families with children is one step that would help address the rising tide of in-work poverty.”
He added: “Action in the Budge this month would mean working families keep more of their earnings and feel the benefit in their pockets just one week after Brexit.”
The work allowance is a key part of UC- a system
devised to incentivise people to work rather than claim benefits.
Universal Credit aims to roll six benefits into one, but has been beset by problems as its been put in place.
It's meant to incentivise people into work by cutting down the benefits as they take on more hours.
Tory MPs yesterday suggested they couldn't back Universal Credit's rollout as it stands.
Plymouth MP Johnny Mercer said: "Universal Credit was designed so that no-one would be worse off.
"Stop the tax-free allowance rise and re-invest into Universal Credit, or I can’t support it. [It is] not politically deliverable."
Ministers are set to put £3billion of cash into "transitional protection" so those going onto the new benefits won't see a drop in their incomes.
The Chancellor is under pressure to find more money for Universal Credit and the NHS as the Budget inches nearer.
He must also find cash to pay for the fuel duty freeze promised by Theresa May at the Tory party conference last week.
What is Universal Credit and why is it running into problems?
- What is universal credit? A benefits system that wraps up six payments — Income Support, Jobseeker’s Allowance, Employment and Support Allowance, Housing Benefit, Working Tax Credit and Child Tax Credit — into one payment.
- Why is there so much anger? Experts claim some families could be £2,400 a year worse off when the scheme is expanded next year because it cuts into work allowances put in place in 2015.
- Hasn't Theresa May put in more cash? The Government has pledged £3billion of “transitional relief” to those migrating on to Universal Credit but this may cover only a fifth of claimants.
- What are MPs calling for? Ex-Cabinet minister Iain Duncan Smith is leading demands for the Government to top up work allowances to reverse cuts by ex-Chancellor George Osborne.
A Government spokesman said last night: "Universal Credit is based on the sound principles that work should always pay and those who need support receive it.
"We are listening to concerns about achieving these principles, improving the benefit, and targeting support to the most vulnerable, including for around one million disabled people who will receive a higher award under Universal Credit.
"This is a far cry from the confusing, unreliable legacy system that failed to pay claimants their full entitlements and consigned people to a lifetime on benefits."
The Sun Says
The new scheme DOES work well for many. It is far simpler and, crucially, incentivises work. But cuts by former Chancellor George Osborne are now biting too hard. Some claimants face a severe blow to their income.
If the PM is genuinely “listening to concerns”, as she says, then good.
Voters generally back less generous benefit payments. Especially compared with the absurd levels under the last Labour Government, which fostered idleness and trapped huge numbers permanently on the dole.
But Brits are famously keen on fair play too.
They won’t support families being stripped of money through no fault of their own.
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