Universal Credit to rise for millions in Tory Autumn Statement U-turn

Jeremy Hunt has abandoned plans to clobber families with a cut to Universal Credit.

In the Autumn Statement on Wednesday, the Chancellor will announce that both pensions and benefits will increase.

But Mr Hunt is expected to set out brutal spending plans that will starve public services of the cash they need in order to announce tax cuts. The Tories hope that a tax-slashing bonanza will turn around their dire poll ratings and encourage voters to forget how they have raised taxes more in the past four years than any other Government in history.

To help pay for the giveaways, Mr Hunt had been threatening to punish families on Universal Credit by failing to increase benefits as normal. Payments are due to increase next April by 6.7%, the inflation figure from this September. To free up cash to pay for bungs for the rich, the Chancellor had been thinking about using the lower inflation figure from October, which was 4.6%. This would have meant low income families would lose hundreds of pounds each, but he is now understood to have dropped this plan.

Mr Hunt has also ditched an idea to fiddle with the pensions triple lock. The full basic state pension for men born after April 1951 and women born after April 1953 is £203.85 per week. With wages increasing at a rate of 8.5%, this is due to increase to £221.17 per week next April. Mr Hunt had considered tweaking the system to lower this by excluding one-off bonuses awarded to NHS staff in the wage growth figure. But following warnings this would leave pensioners £760million worse off, the money-saving wheeze has been shelved.

The Chancellor is expected to confirm, however, that changes to work capability assessments, which were first announced in September, will go ahead. The overhaul will mean that from 2025 onwards fewer people will be entitled to sick and disability benefits as they will be told they should be able to get jobs because of the rise in home working. The change will not impact existing claimants.

Mr Hunt last night said: “After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track… Our plan for the British economy is working, but the work is not done.”

The Government yesterday announced almost three million workers will see their wages rise as it increases both the National Living Wage and the National Minimum Wage. From next April, the National Living Wage will rise to £11.44 per hour - up from £10.42 at the moment. The legal minimum pay rate that had applied to over-23s will be extended to all those aged 21 and above. The National Minimum Wage for younger workers will also go up. Those between the ages of 18 and 20-years-old will see their minimum pay increase to £8.60 per hour - a £1.11 hike.

Chief Secretary to the Treasury Laura Trott, who is the Chancellor’s deputy, yesterday let slip that cuts to personal taxes will form part of the Autumn Statement.

But Paul Johnson, director of the Institute for Fiscal Studies, said that Mr Hunt will only be able to afford tax cuts if he plans to restrict the budgets of Government departments. “If he does say he's got room, it's only because he's claiming to have some incredibly tight spending plans for the whole of the next parliament, essentially cutting public service spending in quite a lot of areas,” the top economist said.

For the same cost of a 1p cut to income tax, the Government could increase Universal Credit by £20-a-week and lift half a million people out of poverty, according to analysis from the New Economics Foundation. Sam Tims, senior economist at the think tank, said: “At a time when households across the country are struggling with the cost of living crisis, it is extremely concerning to see the government looking to offer a tax giveaway that will fuel inequality and make us all poorer in the long run."

Rachel Reeves, Labour’s Shadow Chancellor, said: “After thirteen years of economic failure under the Conservatives, working people are worse off. Prices are still rising in the shops, energy bills are up and mortgage payments are higher after the Conservatives crashed the economy.

“The 25 Tory tax rises since 2019 are the clearest sign of economic failure, with households paying £4,000 more in tax each year than they did in 2010. The Conservatives have become the party of high tax because they are the party of low growth. Nothing the Chancellor says or does in his Autumn Statement can change their appalling record.”