Welfare reforms aim to save £7bn

6 Jul 06
Ministers expect to save £7bn from the overhaul of welfare systems announced this week cash that they believe could be reinvested directly back into services.

07 July 2006

Ministers expect to save £7bn from the overhaul of welfare systems unveiled this week – cash that they believe could be reinvested directly back into services.

Welfare reform minister Jim Murphy said that the DWP estimates the cost of getting people off of Incapacity Benefit and into work at £8,000 per claimant.

The government aims to get one million of the UK's 2.7m IB claimants into work to help boost UK productivity, personal incomes and reduce costs. DWP officials confirmed that meant that the department had produced a 'soft target' to slash at least £7bn – and a maximum of £8bn - from the welfare bill once the government's latest proposals were embedded.

Launching the Bill, Murphy said: 'Each person who leaves benefits generates over £8,000 in savings to be reinvested in public services.'

A DWP spokeswoman later added: 'It is possible that the Treasury could ask for some of those savings to be reinvested elsewhere [in government] but DWP would be seeking a large level of welfare related reinvestment.' Work and Pensions Secretary John Hutton and Murphy revealed their proposals for overhauling the welfare system in a parliamentary bill published on July 4.

It firmed up Hutton's plan to replace IB with a two-tier system of payments: an Employment Support Allowance for current IB claimants who could move back into work; and a higher-rate payment for people with long-term disabilities for whom a return to work is difficult.

The new system will be supplemented by support for those able to work, such as compulsory back-to-work training programmes and access to NHS therapists. A national roll-out (by 2008) of the DWP's successful Pathways to Work pilot schemes, which have helped 25,000 claimants into work, would also follow.

Up to £500m would be needed to implement PtW nationally – just £300m has been put aside to date - a cost critics believe is too high. But Murphy said that the average cost of the scheme per job was just £800, compared to the estimated £8,000 saving from moving an IB claimant into work.

The Bill also outlines plans to strengthen anti-benefit fraud measures and roll-out the piloted Local Housing Allowance across the whole of the social housing sector (and an exploration of its use in the private rented sector – a move perceived as unlikely just months ago).

Welfare pressure groups were largely positive towards Hutton's proposals. Kate Green, chief executive of the Child Poverty Action Group, praised ministers' decision to scrap a planned lower main rate of benefit for young disabled people aged 16 to 25.

But Green warned that 'the holding [standard] rate of benefit remains too low' and called for more work to reduce discrimination against people with disabilities.

Hutton's planned extensive use of the private, charity and voluntary sectors to deliver improved welfare services came under fire in a report by the UK's largest civil service trade union.

The Public and Commercial Services union said the agenda amounted to 'soft privatisation' of services such as Jobcentre Plus.

Adding to concerns over external partners, Angela Greatley, chief executive of the Sainsbury Centre for Mental Health, said that the DWP must cover the full cost of implementing PtW.

'Without it, private and voluntary sector contractors could be forced to prioritise [claimants] with the least complex needs.


Did you enjoy this article?