The Conservative MP who led the rebellion against tax credit cuts is calling on Philip Hammond to rethink the tax rate on universal credit in the budget to help claimants keep more of what they earn.



Stephen McPartland, the MP for Stevenage, said he was urging Hammond to lower the “taper rate” on universal credit again to encourage people receiving in-work benefits to increase their hours without seeing so much of their additional pay taken away.

Quick Guide What is universal credit and what are the problems? Show What is universal credit? Universal credit (UC) is the supposed flagship reform of the benefits system, rolling together six benefits into one, online-only system. The theoretical aim, for which there was general support across the political spectrum, was to simplify the system and increase the incentives for people to move off benefits into work. About 2 million people are currently in receipt of UC. More than 6 million will be on the benefit by the time it is fully rolled out. How long has it been around? The project was legislated for in 2011 under the auspices of its most vocal champion, Conservative MP Iain Duncan Smith. The plan was to roll it out by 2017. However, a series of management failures, expensive IT blunders and design faults mean it is now seven years behind schedule, and rollout will not be complete until 2024. The government admitted that the delay was caused in part by claimants being too scared to sign up to the new benefit. What is the biggest problem? The original design set out a minimum 42-day wait for a first payment to claimants when they moved to UC (in practice this is often up to 60 days). After sustained pressure, the government announced in the autumn 2017 budget that the wait would be reduced to 35 days from February 2018. This will partially mitigate the impact on many claimants of having no income for six weeks. The wait has led to rent arrears and evictions, hunger (food banks in UC areas report notable increases in referrals), use of expensive credit and mental distress. Ministers have expanded the availability of hardship loans (now repayable over a year) to help new claimants while they wait for payment. Housing benefit will now continue for an extra two weeks after the start of a UC claim. However, critics say the five-week wait is still too long and want it reduced to two or three weeks. Are there other problems? Plenty. Multibillion-pound cuts to work allowances imposed by the former chancellor George Osborne mean UC is far less generous than originally envisaged. According to the Resolution Foundation thinktank, about 2.5m low-income working households will be more than £1,000 a year worse off when they move to UC, reducing work incentives.

Landlords are worried that the level of rent arrears accrued by tenants on UC could lead to a rise in evictions. It's also not very user-friendly: claimants complain the system is complex, unreliable and difficult to manage, particularly if you have no internet access.

And there is concern that UC cannot deliver key promises: a critical study found it does not deliver savings, cannot prove it gets more people into work, and has plunged vulnerable claimants into hardship.

Hammond bowed to pressure from Conservative MPs at the autumn statement last year, reducing the taper rate from 65% to 63% at a cost of around £1bn over five years.

But he is now facing calls to go further to ease the financial pressure on people who are moving to the new universal credit system, which rolls six benefits into one monthly payment.

“The taper rate on universal credit is 63 pence in the pound. This is an outrageous tax rate of 63% on net earnings for some on the lowest incomes,” he said. “The chancellor needs to look at this again in the budget, as it simply cannot be justified. It is a barrier to encouraging people to work more hours, as they only keep a few pennies for every extra pound they earn.”

The taper rate determines how quickly people lose their benefits as they increase their hours at work, after a “work allowance” has been used up – the amount people earn before losing any benefits.

It comes after deep concern among some Conservative MPs about the effect of the gradual introduction of universal credit, as some claimants are being pushed into hardship during a wait of up to six weeks for their first payment.

Labour has long highlighted the problem and called for the roll-out to be paused while the system is improved, but David Gauke, the work and pensions secretary, insisted at the Conservative party conference that the government would be pressing on.

Heidi Allen, the Conservative MP who has been pressing the prime minister to listen to concerns, said she agreed with McPartland that it would be brilliant to bring down the taper rate or the work allowance of universal credit, but reducing the wait time for universal credit might be more realistic.



“I think reducing the six-week wait would make a tremendous difference to everyone using the system and could be something relatively inexpensive for the government so that is what I’m pushing on,” she said.

Allen has secured a meeting with May on Tuesday next week to discuss worries that claimants are being pushed into debt and rent arrears while they wait for their first payments.

The government argues the system is improving and has promised to make sure jobcentre advisers are trained to alert claimants to hardship loans – to be paid back later – that are available during the wait period.

The social security system should work to prevent people from getting into debt, not to exacerbate it Debbie Abrahams, shadow work and pensions secretary

Labour has secured a vote on the roll-out of universal credit on Wednesday next week, which would call on the government to pause the expansion of the programme.

It is understood Conservative MPs have been whipped to attend and vote against the Labour motion, despite reports that the government was planning to boycott opposition day debates over fears more could be lost.

Debbie Abrahams, the shadow work and pensions secretary, said: “The government is ignoring its own evidence, and the concerns of its MPs, to push ahead with their flawed universal credit programme.

“The social security system should work to prevent people from getting into debt, not to exacerbate it.

“The numerous problems with universal credit are not just administrative; the delays and cuts made by this government to the programme are all contributing to claimant debt. We will work with them to tackle these issues.

“The government must pause and fix the programme before the roll-out can cause further harm to those struggling to get by.”

May was pressed on the issue this week in the House of Commons by Jeremy Corbyn, who called on the prime minister to scrap charges for the universal credit helpline, which costs up to 55p a minute to ring from a mobile phone.