Peston: Universal credit £20 uplift to continue for another six months

  • Live report from political correspondent Libby Wiener

The £20 “temporary” uplift in universal credit, announced at the start of the Covid-19 crisis, will roll on for another six months I understand - subject to a final sign off by the prime minister.

I am told that the Chancellor Rishi Sunak has abandoned his hope of ending the top-up £20 payment once-and-for-all at the budget on 3 March. The Treasury had originally wanted to terminate it by making a single lump sum payment of circa £500, equivalent to six months money, to all current recipients of it.

Instead, the £20 increment will continue to be paid in the normal way for at least another six months.

This has two implications.

First it allows Labour to sustain its attack for months yet that Boris Johnson’s government continues to plan to cut the incomes of millions of the very poorest.

Robert Peston discusses the politics behind the Universal Credit extension

Second, it paradoxically retains the possibility that the £20 increment will never in practice be abolished.

The Treasury has been reluctant to make the top up permanent, because - with its knock on impact on tax credits - it costs £6bn a year.

But many low income families and individuals have come to rely on it. And they are the people who have been hardest hit by the economic impact of the Covid19 crisis.

Unlike those in the richest half of the income spectrum, whose savings have increased, the poorest 20% have fallen more into debt.

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There have therefore been two arguments for retaining the £20 top up.

First it would be unfair and heartless to remove it.

Second, it would hamper the economic recovery. Every penny of the £6bn a year is spent by its recipients, so abolishing it would at a stroke remove £6bn of demand from the economy, at a time when many businesses are in dire straits.

The six-month extension of the universal credit top up is anticipated by both the Treasury and the Department of Work and Pensions. But it will not be set in stone until formally approved by the prime minister.

UPDATE 13.30

The chancellor and Treasury hope they can dovetail the extension of the £20 universal credit top up with an associated extension of the furlough and self-employment income support scheme - and that all will definitively end after six months.

“They think it is a hard stop after six months” said a source.

But the maximum risk of a sharp rise in unemployment will come when furlough and SEISS end. So that is when there will be maximum pressure from both Tory backbenchers and Labour to extend the universal credit top-up beyond six months. Which is why officials in the DWP and Downing Street have been arguing it would be much better to extend the top-up for at least a year, in the first instance.

Also there are an estimated 500,000 people in Scotland on universal credit. So the prospect of the looming abolition of the £20 increment is likely to play badly for the Tories in May’s elections to the Scottish parliament.