Philip Hammond 'could scrap promised income tax cuts to boost Universal Credit'

Philip Hammond could abandon plans to cut taxes for millions of people and instead pump money into the under-fire Universal Credit system, it has been reported.

The Chancellor is said to be mulling whether to scrap the Conservative promise to raise the level at which workers start paying income tax in order to find an extra £2bn for the flagship benefits system.

Pressure to change course on Universal Credit (UC) has been growing, with former Prime Ministers John Major and Gordon Brown warning it could become another “poll tax” for the Tories.

The new system – which rolls six benefits into one – has suffered numerous setbacks during its phased rollout, and is set to be delivered across the country next year.

Yesterday Work and Pensions Secretary Esther McVey admitted some who switch could end up worse off. She is said to have told colleagues some families could miss out on up to £200 a month.

According to the Daily Telegraph, Hammond could cave to pressure from the likes of Iain Duncan Smith – the architect of UC – to replace £2bn that was cut from the system by former Chancellor George Osborne.

The Conservatives made a manifesto pledge to increase the income tax threshold from £11,850 to £12,500 by 2020 and the higher rate from £46,351 to £50,000.

But failing to deliver the promise would free up funds for Hammond to pump more money into UC.

A spokesman for Theresa May yesterday hinted that a change of course could be on the cards when he said “we are listening to concerns and we are taking a test-and-learn approach to Universal Credit”.

Tory MP Johnny Mercer tweeted: “Stop the tax-free allowance rise and re-invest into Universal Credit, or I can’t support it…

“Three quarters of the people that benefit from freezing the income tax threshold are the highest earners.

“If we want to be committed to improving the lives of the 20 per cent who are worse off, that means the money should be reinvested into Universal Credit.”

A UK Government spokesman said: "Universal Credit is based on the sound principles that work should always pay and those who need support receive it.

"We are listening to concerns about achieving these principles, improving the benefit, and targeting support to the most vulnerable, including for around one million disabled people who will receive a higher award under Universal Credit.

"This is a far cry from the confusing, unreliable legacy system that failed to pay claimants their full entitlements and consigned people to a lifetime on benefits."