CHANCELLOR Rishi Sunak should replace the £20-a-week increase in Universal Credit (UC) with a new “coronavirus hardship payment”, a centre-right think tank has suggested.

The Centre for Policy Studies, which is regarded as being close to Government thinking, said repackaging the payment could make it easier to phase out as the pandemic eases.

The UC increase – originally announced last March to support struggling families through the Covid-19 crisis – is due to expire at the end of March.

However, Mr Sunak is under intense pressure – including from some Tory MPs – to extend it while lockdown restrictions remain in place.

So far the Chancellor has resisted the calls, insisting he needs to start rebuilding public finances after the massive support the Government has given to nurse the economy through the pandemic.

In a briefing paper, the CPS said it would be “unreasonable” to cut support at a time when lockdown restrictions are creating intense financial pressure for many families.

However, replacing it with a clearly defined temporary measure could offer the Government a way out of its political dilemma.

The report’s author, James Heywood, said: “The Government have backed themselves into a corner with the £20 uplift in Universal Credit – it’s much harder to take something away once it’s in place.

“Replacing the uplift with a clearly defined temporary support mechanism, combined with other reforms, would offer the intended financial support while making it easier to prepare claimants for its eventual withdrawal.”

The report said the hardship payments should run for six months, with a further three-month phasing-out period when they would be cut by half.

At the same time, it called for a more generous one-off uprating of UC, which is currently set to rise by just 0.5% in April.

The CPS said a 2.5 per cent increase, in line with the rate being applied to the state pension, would add an extra £100 a year to the standard allowance for a single claimant over the age of 25.