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.
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.
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.
guardian.co.uk © Guardian News & Media Limited 2010