Welfare shake-up plans announced

30 Jul 10
Plans to overhaul the benefits system, making sure 'work always pays,' were set out by the government today.
By Lucy Phillips

30 July 2010

Plans to overhaul the benefits system, making sure ‘work always pays,’ were set out by the government today.

All those coming off unemployment benefits and going into jobs would continue to receive state support until they earned over a certain level, under proposals outlined in the Twenty-first century welfare green paper.

Launching the document at the Bromley-by-Bow community centre in East London this morning Work and Pensions Secretary Iain Duncan Smith promised ‘fundamental change from top to bottom’. He said: ‘After years of piecemeal reform, the current welfare system is complex and unfair. For many people, taking a job leaves them no better off than a life on benefits, and this has trapped significant parts of our society in intergenerational worklessness and entrenched poverty.’

The paper proposes combining elements of the current income-related benefits and tax credit system into a ‘single universal credit’ and bringing all out-of-work and in-work support together into a single payment. Monthly household earnings would be supplemented through credit payments reflecting circumstances, such as children, housing and disability.

But the paper, which does not contain any detailed costings of how the new system would work, has come under fire from commentators. The government previously estimated that it would cost £3bn to set up the new universal benefit. Labour has costed the proposals at £7bn, raising questions about their affordability in the current public spending climate.     

Kate Stanley, deputy director of the Institute for Public Policy Research, welcomed a simpler system but expressed disappointment at the scope of the reforms.

‘With 2.5 million people unemployed and five jobseekers for every vacancy, it is difficult to see how today’s welfare reform plans will tackle the real causes of worklessness. So as well as questions about the affordability of the government’s proposals, there are also real questions about their effectiveness,’ she said.    

Unions were also sceptical, particularly in light of the public sector job losses they are expecting after the autumn Spending Review.

Gail Cartmail, assistant general secretary for public service at Unite, said: ‘For the government to afford to do this will inevitably mean that other benefits not directly related to the unemployed will have to be cut, given the hardline message coming from George Osborne at the Treasury.’

She added that with economic growth expected to remain low, ‘the likelihood of new jobs being created without the impetus of state spending is negligible’. 

But the CBI said the proposals were ‘a step in the right direction’. Deputy director general John Cridland said: ‘People who work tend to have longer, healthier lives, and working brings wider social benefits. Getting more people off benefits and back into work is also crucial to restoring the public finances, as those in jobs will pay taxes and draw less in welfare payments.’

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