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“On the key issues of the day during the pandemic, you have seen Keir Starmer’s Labour Party abstain on substantial questions that the British public do deserve an answer to…” In her daily briefing to us Lobby hacks, Boris Johnson’s press secretary Allegra Stratton went on the offensive against the Opposition in a manner which would make her boss proud.

The main problem with the attack line – abstaining is a stain on your character – was that the government itself abstained on Monday on Labour’s Commons motions on extending Universal Credit and on free school meals. When this was pointed out, Stratton said the school meals motion was “irrelevant” and the Universal Credit one “wasn’t the right moment for us to update the House”.

That suggestion of wriggle room, if not a full-blown U-turn, on Universal Credit was further underlined when she said that chancellor Rishi Sunak would be updating MPs “in due course” and “that will happen shortly”. That “shortly” was itself a nudge forward from previous statements that Sunak would make an announcement “when he thinks the time is right”.

For many worried about losing the £1,000 a year uplift in April, that time is now. With recent research showing how bills for food, heating and data have increased for the working poor, removing that money would have a major impact on the daily lives of the very people Johnson and Sunak had promised “to put our arms around”.

The PM said this week that “we will continue to do that”, a hint that he will indeed continue some form of extra support for those on the benefit. Indeed, several Whitehall insiders say that it’s not Johnson but Sunak who is most opposed to any simple extension of the Universal Credit uplift. Claims that it would cost £6bn, suggestions that fuel duty hikes or even tax rises would be needed to pay for it, were pushed by what we can diplomatically call friends of the Treasury.

A crunch meeting between Sunak, the PM and work and pensions secretary Therese Coffey (who opposes ending the uplift) last week failed to find a solution. The idea of a one-off payment of £500 has been floated, as has extending the higher rate of benefit (£20 a week) until July. There is even one proposal to target either children or housing costs with extra cash.

But none of the Treasury solutions is going down well within government, I’m told. Several ministers, including cabinet ministers, have made plain that a simple extension of the uplift would be the way to defuse what one of them told me could become “another Marcus Rashford campaign”.

“They [the Treasury] just don’t want to do it,” one senior minister tells me. “They have been dragged to a point where they begrudgingly accept that something must be done so are pushing the £500 one-off.” A minister says the three-month extension was the Treasury’s “second worst idea after the one-off [payment]”. “The best compromise is to wait until the autumn statement,” they say, an extension of up to seven months.

Sunak fears that locking in the uplift for another year would bind his hands at a time when he needs flexibility as well as moves to start getting the public finances in order. But some ministers believe that this is just too toxic an issue to try and prove Sunak’s sound money principles. “Their own forecasting body [the OBR] is saying employment won’t reach pre-Covid levels for another four or five years,” one minister says, pointing out that’s the central scenario.

And that’s one of the real political difficulties: the sheer number of people who have had to go on Universal Credit because of the pandemic, many of whom have never had experience of the welfare system before, many of whom are now constituents in “Blue Wall” Tory seats in the north and midlands.

The line-to-take handed to some MPs, that work is better than welfare, isn’t going down well either. It signally fails to recognise that more than two million UC claimants are indeed in work, and that 70% of children in poverty are in working families.

It was not a coincidence that the Northern Research Group of backbenchers expressed their unease this week about the planned Universal Credit, while loyally sticking to the whip to abstain. Huge numbers of people in Blue Wall seats are either on furlough or Universal Credit.

Louise Casey’s warning to the BBC on Wednesday was a reminder to No.10 of what was at stake among all those former Labour voters who were told the Johnson government was different. “Remove that £20 a week – it’s too punitive, it’s not the right thing to do – and I think they just go back to being the nasty party.”

Stratton told us: “There is no way this party or this government could be called the nasty party when you look at the £28billion of support that has been put in place during the pandemic.” But the whole issue of Universal Credit, like free school meals, gets to the heart of where his priorities lie: rebalancing the books or being seen to protect those struggling on low pay.

As for the timing of any announcement, I’m told No.10 want to delay a little but there is a growing realisation that the March Budget is just too far away. “We should not wait till March,” one cabinet minister says. The real limiting factor is just how determined Sunak is to dig in to calls to extend the uplift until the autumn. Some in Whitehall want to wait until after the first February 15 vaccination deadline, more think it can’t wait even that long.

On a second successive day of record deaths reported for the UK, it seems clear that restrictions on the economy won’t be lifted until Easter at the very earliest. Unemployment is expected by many to spike this year, with even more heading for welfare. Sunak knows that it will be the autumn at the earliest before he can begin any plans to stem borrowing and start to repair the public finances.

And in a week when we learned that Test and Trace is paying private consultants £1,000 a day, the idea of cutting £1,000 a year from those in need looks pretty grotesque. We will find out “shortly” whether putting your arms around the public means an embrace of compassion – or a punishing bear hug.

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