04 February 2005
Despite ministers' rhetoric, the long-awaited reform of Incapacity Benefit outlined this week drew on a familiar political solution to a troubling financial issue: cut basic state payments to encourage people back to work.
The Department for Work and Pension plans to divide the benefit, which is currently paid to 2.7 million claimants at an annual cost of £7bn, into two parts. This will push hundreds of thousands of people towards job centres with lower basic benefit payments in their pockets.
Work and Pensions Secretary Alan Johnson announced the IB reform programme when he published the department's ambitious five-year strategy on February 2. He also included incentives to encourage people to work longer to ease the rising costs of the state pension system, and a target to raise the UK's long-term employment rate from 75% to 80%, which would make it the highest rate in the industrialised world.
However, critics dismissed much of the five-year plan as a pooling of existing government announcements and commitments.
David Willetts, shadow work and pensions minister, said the reforms amounted to a 'Groundhog Day'. 'The prime minister has made these promises before and hasn't delivered,' he claimed.
Johnson intends to scrap the IB from 2008 and replace it with two schemes for new claimants. People with severe conditions preventing them from working, who make up around 15% of current IB claimants, will be moved on to a Disability and Sickness Allowance paid at a higher rate than the existing IB (£74 for those unemployed for more than 52 weeks).
Johnson said: 'Society has a responsibility to support people who are kept out of work by health problems for as long as is necessary.'
But claimants with more manageable conditions, around 85% of current IB recipients, will be shifted on to a Rehabilitation Support Allowance, paid at similar rates to the current Jobseeker's Allowance of £55 per week.
A DWP source estimated that, if a national roll-out of its Pathways to Work programme is completed quickly, 'the government could reduce the total cost of operating the IB system within five years'.
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