Parliamentary reporter @TrinderMatt

A LABOUR government would replace universal credit (UC) with a welfare system that allows low-income earners on benefits to keep more of their take-home pay, the party announced today.

In a speech in Manchester, shadow work and pensions secretary Jonathan Reynolds said that Labour would develop an alternative which had a lower taper rate. 

The current rate sees 63p of every £1 earned by a claimant automatically deducted from their UC payments. This is in addition to any income tax and national insurance due, Labour warned.

According to the party’s research, a single parent working 30 hours a week loses £573 a month as a result: an effective marginal tax rate of a staggering 75 per cent.

In contrast, anyone earning more than £150,000 a year, including Prime Minister Boris Johnson, has an equivalent tax rate of just 47 per cent, Labour argued.

“Improving our social security system to allow people to have jobs you can raise a family on is part of our new deal for working people,” Mr Reynolds said.

“Reducing the taper rate, increasing the minimum wage immediately to £10 an hour, sick pay for everyone, protection against unfair dismissal and the right to flexible working for all workers are all part of our plans to make work pay.”

The former shadow energy minister also reiterated warnings that a proposal to cut the £20 per week uplift for UC recipients next month would increase poverty and weaken the economy.

According to Department for Work and Pensions (DWP) figures, almost three and a half million children will be affected by the cancellation of the uplift, which was brought in to help the most vulnerable during the Covid-19 pandemic.

“Cutting the budgets of the very families who need it most is unforgiveable,” Mr Reynolds stressed, saying that Labour would fight the move “with every tool at its disposal.”

Scottish Labour’s social security and social justice spokeswoman Pam Duncan-Glancy added that it was time for SNP ministers to “stop dragging their feet” and finally deliver a promised minimum income guarantee north of the border. 

“[UC’s] fatal flaws do as much damage in Manchester as they do in Glasgow, and it needs to be replaced across the entire country – but in Scotland we can still use the powers we have to make things better.”

A DWP spokesperson claimed that UC is “working” as it “incentivises finding employment.”