Bonfire of the benefits plan in drive to make work pay

Published on Friday 30 July 2010 15:26

IAIN Duncan Smith pledged yesterday to make work more financially attractive than a life on benefits as he unveiled plans for a complete overhaul of Britain's complex welfare system.

•Iain Duncan Smith's interest began during a visit to Glasgow's Easterhouse Picture: Donald MacLeod

Unemployed people would be able to keep more of their benefits after getting a job to act as an incentive for getting back into the workplace, he declared yesterday.

Under the moves, benefits would only be removed gradually as people began working up the career ladder, to convince claimants that work will pay.

The plan unveiled by the Work and Pensions Secretary is designed to end a situation where claimants turn down work because they know their tax credits and benefits will be removed when they start earning.

Mr Duncan Smith also said he may scrap out-of-work benefits and tax credits, replacing them with a single payment, so that it was clear exactly how much people were getting from the state.

A single benefit, officials claims, will let everyone know where they stand, replacing the complex current situation where the government oversees 50 different types of benefits and tax credits.

However, while the idea was welcomed yesterday, there was caution from political opponents who said the plan could end up costing as much as 7 billion just to introduce.

Mr Duncan Smith - whose interest in welfare reform began on a visit to Glasgow's Easterhouse estate - yesterday spoke of the "tragedy" of families who saw benefits as their only possible means of income. He said the Britain's out-dated system had created "ghettos" of worklessness where "idleness" had become institutionalised.

Five million people in the UK are on out-of-work benefits, 1.4 million of whom have been claiming for nine or more of the last ten years. The UK now has one of the highest rates of workless households in the EU.

In Scotland, the scale of welfare dependency has been well recorded. In Glasgow, the worst affected part of the country, one in seven people of working age is on sickness benefits.

Launching his document "21st century welfare", Mr Duncan Smith said: "The key thing is to make work pay at a higher rate than being on benefits. This complex system means many people don't take work when it is available because they are scared they will lose too many of their benefits."

He added: "We now have children growing up in households where neither parent works and where the only future is one stuck on benefits. This is a tragedy we must bring to an end."

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Mr Duncan-Smith refused to be drawn on the cost but has claimed billions could be saved in bureaucracy, fraud and error with the introduction of a "radically" simpler system.The welfare system costs 3.5 billion to administer, while a further 5 billion was lost in fraud or error.

However, shadow work and pensions secretary Yvette Cooper said there was a major question mark about the fine print of the reforms.

"We think it's good to go further," she said, "but the truth is that the Budget is heading in the opposite direction, cutting tax credits and increasing withdrawal rates. Major reform either costs billions or means taking money from those who need it most. Iain Duncan Smith needs to be honest and tell us which it is."

Grahame Smith, Scottish Trades Union Congress General Secretary said: "The Secretary of State's objectives of simplification of the system and making work pay are laudable if hardly original. However, work can only be made to pay by cutting out-of-work benefits or through providing a wage that allows for a decent standard of living."

John Cridland, the CBI's deputy director general, said: "Realigning the benefits system to make work pay and improve welfare to work services is a step in the right direction.

"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."