Rishi Sunak doubles one-off payment offer for universal credit claimants to £1,000

Christopher Hope
·4-min read
FILE PHOTO: Britain's Chancellor of the Exchequer Rishi Sunak leaves Downing Street, in London, Britain, November 25, 2020. REUTERS/Simon Dawson/File Photo - Simon Dawson/REUTERS
FILE PHOTO: Britain's Chancellor of the Exchequer Rishi Sunak leaves Downing Street, in London, Britain, November 25, 2020. REUTERS/Simon Dawson/File Photo - Simon Dawson/REUTERS

Rishi Sunak has doubled his offer of a one-off payment to millions of universal credit claimants to £1,000 to replace the weekly £20 uplift, and stave off a growing rebellion among Tory MPs.

The Chancellor is hoping that paying an upfront sum could trigger a spending spree to help the economy, The Telegraph understands.

Businesses are set to be hit with a double whammy of tax rises in March's budget, however, as Mr Sunak is lining up a gradual reintroduction of business rates and a rise in corporation tax.

Writing in The Telegraph, Andrew Griffith MP, a former business adviser to Boris Johnson in 10 Downing Street, backed an increase in corporation tax.

He writes: “Today the UK has the lowest corporation tax rate in the G7. Increasing corporation tax rates towards the £1 in every £4 of business profits rate, last seen as recently as 2013, would still see the UK be one of the most internationally competitive economies, particularly if accompanied by modernisation of R&D tax credits and the Government’s ambitious investment in skills.”

The £20 a week uplift in universal credit during the pandemic is due to end on March 31 and Mr Sunak is under pressure from Tory MPs in traditionally Labour areas to extend it.

However, the Chancellor is said to be loath to continue it, fearing that it would then become a permanent increase costing £6 billion a year.

Instead, he is offering to pay the uplift for a year in one £1,000 payment, twice as much as the £500 one-off sum previously reported. A Treasury source declined to comment on the specifics but confirmed that a one off payment was on the table.

Another £4.6bn of support to help businesses through latest lockdown
Another £4.6bn of support to help businesses through latest lockdown

Mr Sunak is keen to delay any decision until the Budget, however Cabinet ministers including Therese Coffey are pushing for a resolution on the issue this week.

Allies of Ms Coffey say more than half of the 5.7 million universal credit claimants have signed on since the pandemic started, and so will see the ending of the £20 a week as a cut.

One Government source said Mr Sunak and his team saw the one-off payment as a way of boosting the economy. The source said: “One of the motivations of the Treasury is they think people will go out and spend it and help stimulate the economy.”

The Chancellor is said by several ministers to have scaled back the ambition of the Budget to focus on supporting jobs and the economy through the crisis.

Allies said Mr Sunak would only decide the shape of the Budget when more progress has been made on the rollout of the coronavirus vaccine in the middle of next month.

Cabinet ministers expect Mr Sunak to hold back any large scale tax increases to another Budget in the Autumn to start to tackle the structural deficit, however Treasury sources have insisted that “no decision” had been taken.

Instead, Mr Sunak is expected to use the March Budget to start to plan for the medium term recovery of the economy to create firm foundations for future economic shocks.

Chief among these is an expected increase in corporation tax.

One source said there was a feeling in the Government that companies were supported or “bridged” through the coronavirus crisis. They added that it was not clear that a lowering in the corporation tax rate from 28 per cent in 2010 to 19 per cent by 2017, had brought in the investment hoped.

Mr Sunak is also weighing up whether business rates (currently subject to a holiday until March 31) should be gradually reintroduced through a tapering system rather than in full overnight to avoid crippling retailers.

The current 100 per cent business rates relief holiday for retail, hospitality, leisure and childcare sectors is due to expire at the end of the 2020/21 financial year.

Other measures that Mr Sunak will have to consider extending after March 31 are the stamp duty freeze and a temporary reduction of VAT rates to five per cent for hospitality businesses.

Mr Sunak’s team had sent out a questionnaire to all Conservative MPs before Christmas asking for Budget ideas by January 14.

The document, seen by the Sunday Telegraph, was titled "Spring Budget 2021" and asked Tory MPs to fill in boxes titled "Name/Constituency", "Summary of Idea", Policy Details", "Who will this benefit? Why does it matter politically?" and finally "If a spending commitment or tax cut, how would this be funded?"

Separately, Gerard Lyons, the Prime Minister's former economic advisor during his time as Mayor of London, writes in The Telegraph that the Government must not wait until zero deaths to ease lockdown rules.