Rishi Sunak has been urged to use the budget to help families with “immediate pressures” through the winter, as pay rises alone are unlikely to make up for the cost-of-living crisis and universal credit cut.
Bridget Phillipson, the shadow chief secretary to the Treasury, said the chancellor was so far “giving with one hand and taking away with the other” as the national living wage rise would not in many cases make up for the £20 a week cut to universal credit and rising inflation.
Sunak is expected to announce a flagship measure to help with the cost of living at the budget, which is due to be announced in the Commons at 12.30pm on Wednesday.
He could offer help with energy bills, which have risen by 12% on average, and may also reduce the taper rate on universal credit, which would allow those in work to keep more of their earnings.
Andy Burnham, the Labour mayor of Greater Manchester, said he had heard there would be a “U-turn” on universal credit that would help those in work.
In his budget, Sunak is expected to strike an upbeat note, after proclaiming an “age of optimism” after setting out £30bn of spending on the NHS, transport and skills in the run-up to Wednesday’s speech.
He has more room for manoeuvre on spending than previously thought earlier this year as the economy has performed better than forecasts.
However, the threat of inflation is still looming over winter before pay rises from the higher national living wage and end to the public sector pay freeze come into force in spring.
Sunak’s 1.25 percentage point rise in national insurance also comes into force in April, while the universal credit cut has already happened.
In a round of media interviews, Phillipson said the cut to universal credit was “the biggest cut to social security we have seen since the welfare state was created”.
“For many families it is all they have ever known,” she told Sky News. “A lot of families started receiving universal credit because of the pandemic. It is a massive hit to families’ incomes. We want to see immediate action to deal with the cost-of-living crisis facing families as we are entering a pretty tough winter for lots of people, but also businesses too.
“We have had a lot of smoke and mirrors going into this budget, and it’s all very good and well the government promising things, but if that doesn’t lead to people feeling that extra support in their pocket, that will be the real test for the government.”
Robert Jenrick, a former Treasury minister, told broadcasters Sunak would have to think carefully about the pressures on people on modest incomes when he delivered the budget.
Jenrick said there were “reasons for optimism”, but the chancellor was still facing some problems.
“I think the Office for Budget Responsibility forecasts are going to show the economy has grown substantially therefore we are borrowing much less as a country, and that gives the chancellor more room to invest in the future of public services like the NHS,” Jenrick told Sky News.
“But I think he is also going to have to think carefully about people on the most modest incomes and how he can help them in what is undoubtedly still going to be a difficult period when we are seeing inflation rising, higher energy prices and so on.”