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Labour attacks ‘devastating’ benefit cuts plan as Sunak ‘mulls’ £500 grant for claimants

Britain's Chancellor of the Exchequer Rishi Sunak reacts during a media interview after arriving at the BBC in central London on November 22, 2020, to take appear on the BBC political programme The Andrew Marr Show. - Britain's debt is now at its highest level since 1961 as a share of GDP, after the government embarked on a massive spending spree to mitigate the economic effects of the COVID-19 coronavirus pandemic and resulting lockdowns. (Photo by Tolga Akmen / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)
Britain's Chancellor of the Exchequer Rishi Sunak. Photo: Tolga Akmen / AFP via Getty Images

The UK’s opposition party has called out the government’s “devastating” plans to proceed ahead with planned cuts to millions of British families’ income.

It comes as chancellor Rishi Sunak is allegedly planning a one-off £500 ($679) payment for benefit claimants instead of extending the £20-per-week Universal Credit (UC) increase.

Sunak met with the work and pensions secretary Therese Coffey on Friday to discuss the alternatives to the increase in UC payments, according to the Times newspaper.

Last spring at the onset of the coronavirus pandemic and the first national lockdown, the chancellor increased UC and the basic working tax credit by £20 a week in his first set of policy announcements.


The move added an extra £1,040 to claimants’ annual incomes.

The boost in UC payments is due to come to an end in April, which could leave some of Britain’s poorest families facing a cut in their weekly income.

A one-off £500 payment, to nearly six million claimants, could cost the Treasury around £3bn.

As the UK faces its worst economic crisis, the Labour Party’s shadow work and pensions secretary said Sunak’s decision to wind down support with cuts to UC “will be devastating for families already struggling to get by.”

Jonathan Reynolds said that “bringing in a one-off payment that doesn’t even equal half the amount the government is planning to cut from millions of families’ incomes will damage our recovery.”

The MP also warned about job losses and the looming furlough “cliff-edge.”

Adding “a lump sum rather than extended support” will cause people “to fall through the gaps” with unemployment support at a 30 year low.

“Instead of yet another inadequate sticking plaster, the government needs to do the right thing and cancel the cut to universal credit. If the chancellor refuses, we urge Conservative MPs to vote with Labour on Monday to give families the security and support they need,” Reynolds said.

The Treasury department declined Yahoo Finance’s request for comment, but said that “no decisions have been taken and all options remain on the table.”

READ MORE: COVID-19 grants could trip up tax bills for self-employed

The Treasury referred to comments prime minister Boris Johnson made to a parliament committee on Monday, where appeared to hint that he was in favour of scrapping the payment.

When asked in front of the cross-party liaison committee of MPs Johnson said: “I think what we want to see is jobs, we want people in employment and we want to see the economy bouncing back.”

“And I think most people in this country want to see a focus on jobs and growth in wages than on welfare, but clearly we have to keep all of these things under review,” Johnson added.

The Financial Times reported that the chancellor would prefer to focus spending on job support measures, and the Telegraph said Sunak’s allies believed he would be “very reluctant” to extend the increase to UC.

Nevertheless, the issue will be on the table on Monday, when Labour is due to hold two opposition day debates and votes in the Commons on the benefit uplift and on free school meals provision.

Sunak is set to announce future plans for the budget on 3 March, where he will try to rein in a budget deficit of nearly £400bn.

It comes as experts warned on Friday that the UK was on the brink of its first “double-dip” recession, despite official figures showing that the economy fared better than expected in November.

The Office for National Statistic figures showed that gross domestic product (GDP) declined by an estimated -2.6%, with economist expecting a -5.7% shrink.

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