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Universal Credit rise should be REPLACED with hardship payment in £6bn scheme

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The Centre for Policy Studies (CPS) argues that the £20 “uplift” to universal credit which is to stop at the end of March is a blunt instrument and poorly targeted. Boris Johnson and Chancellor Rishi Sunak are under strong pressure to keep the extra cash in place, with Dame Louise Casey, the Government’s former homelessness adviser, warning the Tories risk looking like the “nasty party”.

James Heywood, head of welfare and opportunity at the CPS, said: “The Government has backed themselves into a corner with the £20 uplift in Universal Credit – it’s much harder to take something away once it’s in place.

However, they do have the opportunity now to make significant changes to the system to benefit claimants and ensure it always pays to work.

“Replacing the uplift with a clearly defined temporary support mechanism, combined with other reforms, would offer the intended financial support while making it easier to prepare claimants for its eventual withdrawal.”

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The CPS warns that keeping the £20 payment would add more than £6billion to the annual welfare bill, and argues it has given claimants who are younger, single and childless a much bigger percentage boost to their incomes than those with families and children to support.

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However, it warns against simply pulling the plug in April with furlough due to end and pandemic restrictions still in place. Instead, it says that replacing the uplift with a coronavirus hardship payment would ensure people do not see a sudden fall in income.

The payment would be “clearly defined as a temporary measure to last a further six months”, with an additional three-month phasing-out period when it would be halved.

The think tank, founded in 1974 by Margaret Thatcher and Sir Keith Joseph, also makes the case for a more generous universal credit system which is better at rewarding work.

It suggests a one-off uprating of universal credit – which is currently set to rise by just 0.5 percent – of 2.5 percent in line with the state pension.

The CPS also wants to strengthen incentives to work, stating: “Claimants currently lose 63p of every £1 they earn in work, which can make it less worthwhile for claimants to take up employment. These proposed changes would mean those who move back into work after the pandemic would keep more of their earnings, and would make the benefits system more generous overall.”

A spokesman for the Resolution Foundation cautioned against phasing out the payments over the summer, saying: “It’s good to see proposals for continuing higher benefit payments beyond the end of March when they currently expire. However, phasing them out over the summer of 2021 fails to recognise that this year is likely to be more difficult for family finances than last year, not least as unemployment rises.”

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A Government spokesman said: “We are committed to supporting the lowest-paid families through the pandemic and beyond to ensure that nobody is left behind. That’s why we’ve targeted our support to those most in need by raising the living wage, spending hundreds of billions to safeguard jobs, boosting welfare support by billions and introducing the £170million Covid winter grant scheme to help children and families stay warm and well-fed during the coldest months. We will continue to assess how best to support the economy.”

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