Budget 2021: Sunak softens universal credit cuts to tackle squeeze on families

Rishi Sunak has bowed to intense pressure by partly reversing universal credit cuts as he announced measures at the budget to deal with a squeeze on households this winter with lower alcohol and fuel duties.

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Photograph: House of Commons/PA

In a budget statement aiming to move on from the coronavirus pandemic, the chancellor said he would launch reforms to universal credit worth more than £2bn to soften the blow from the biggest ever overnight cut in benefits earlier this month.

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Sunak said the taper rate in universal credit, which reduces the amount a benefit claimant can earn from work, will be reduced from 63p in the pound at present to 55p from no later than 1 December.

It comes as the chancellor benefits from an improved growth outlook after a faster economic recovery from the pandemic earlier this year despite mounting pressure on businesses and households from rising inflationary pressures.

Saying he would support households despite imposing higher taxes on workers and cutting benefits elsewhere, he said: “Today’s budget delivers a stronger economy for the British people: stronger growth, with the UK economy recovering faster than our major competitors. Stronger public finances, with our national debt finally under control. Stronger employment, with fewer people out of work and more people in work.”

© Photograph: House of Commons/PA
The chancellor, Rishi Sunak, announces his budget plans in the House of Commons.

Giving his statement to a packed House of Commons, he said he would also launch the most radical changes to alcohol duty for 140 years with a new tax system, cutting rates on low-strength wines, beers and ciders, and pushing up the cost of high-strength beverages.

Against a backdrop of record high petrol prices hitting households amid severe disruption to the global economy after lockdown, fuel duty will also be frozen for the twelfth consecutive year, saving the average motorist £1,900.

The measures aimed at tackling the cost of living come as rising inflation bites into the spending power of households, although will also be viewed as the government prepares to host the Glasgow Cop26 climate summit within days and as cases of coronavirus remain high.

“The budgets are set, the plans are in place, the task is clear, now we must deliver. This isn’t the government’s money, it’s taxpayers’ money,” Sunak said.