Government to unveil radical plans to reform 'broken' benefits system Sector:Central Government Date Created:Fri 30th Jul 2010, 12:28:24 Source:24 Dash Link:http://www.24dash.com The Government will unveil "radical" proposals to reform benefits after ministers described the system as "broken". Work and Pensions Secretary Iain Duncan Smith will set out a series of options aimed at ensuring that people would see the value of moving from benefit to work. The minister is expected to say: "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 inter generational worklessness and entrenched poverty. "The complexity of the system also creates risk and uncertainty for the people in society who most need stability. We want to simplify the system to make it clear that work will always pay. "Our reforms should also ensure the system is easier for individuals to understand and will reduce the high costs of fraud and error." The proposals will be set out in a so-called Command Paper, 21st Century Welfare, and are aimed at simplifying the existing tax and benefits system. Ministers said they also wanted to unify the disparate elements that form the benefits structure as well as rectifying the "illogical" position of benefits paying more than work. Options to be published will include combining elements of the current income-related benefits and Tax Credit systems, bringing out-of-work and in-work support together in a single system and supplementing monthly household earnings through credit payments reflecting circumstances such as children, housing and disability. Sources said the options expected to be set out represented the most radical root-and-branch overhaul of the system in decades. Ministers said five million people were "abandoned" on out-of-work benefits, with a "staggering" 1.4 million of them on benefits for nine or more of the last 10 years. Shadow work and pensions secretary Yvette Cooper described Mr Duncan Smith's announcement as "a sham to cover the fact that the Budget actually cut work incentives, cut jobs and cut help for people to return to work". She added: "Labour's minimum wage and tax credits made many families thousands of pounds better off in work. We think it's good to go further, 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." Former welfare minister Angela Eagle said that Mr Duncan Smith's proposals were costed at about £7 billion a year by the Department for Work and Pensions under the previous Labour administration. "What Iain Duncan Smith has got to tell us is whether the Treasury are going to invest after the emergency Budget £7 billion up-front to change the welfare system," Ms Eagle told BBC2's Newsnight. "If they don't, is he going to resign because he can't get his reforms through his own Government?" But Oliver Heald, a Conservative member of the Commons Work and Pensions Committee, told the programme: "This is about a very important direction of travel, because at the moment most people on benefits don't think they would be better off in work, and they are right in many cases. This is about changing that, so that nobody can say I will be worse-off in work, or I won't be much better off. "And also simplification is vital, with 51 benefits and 10,000 which the benefit officers have to work through in guidance on these benefits. "If he can make this work and get a simpler system that really gives people incentives to work, that would be fantastic." Speaking on GMTV, Mr Duncan Smith said the complexity of the benefits system was the reason that Britain had one of the highest rates of workless households in Europe. He said that, under the changes, people going back to work on low incomes would see an increase in take-home pay. "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." Mr Duncan Smith conceded that his plans were likely to require extra spending at a time of deep cuts across Whitehall but insisted they were affordable. Savings made by simplifying the system would help outweigh the extra cost of allowing people to keep payments for longer after finding work, he suggested. "When we look at figures for investment, we have to recognise that right now the present system costs significant amounts of money more each year - £60 billion in the last 10 years. "And because of its complexity, when you look at the way tax credits have to be administered, we know there are dramatic amounts of money that are overpaid each year and lost. "The first thing that happened when I walked through the doors of the Department of Work and Pensions was my officials said to us 'For goodness' sake, let's get on and reform this because we spend so much money holding together this complex system which is really, really on the verge of breaking down. Every day we worry that we simply will have a system breakdown and we will lose people as a result'." He went on: "We have done the maths. We are talking about the systems here; maths is for the White Paper when we come forward with the system we fully select." Asked if he had made the sums add up, he said: "I believe we have. And the Treasury have discussed this with us." Mr Duncan Smith appeared to signal that benefit rates could be varied across the country to reflect the different costs of living. Asked whether that could be a result of attempts to "localise" benefits, he told the BBC Radio 4 Today programme: "We want to talk to people from different areas to see whether or not they think they would prefer to see that." Mr Duncan Smith conceded that his plans were likely to require extra spending at a time of deep cuts across Whitehall but insisted they were affordable. Savings made by simplifying the system would help outweigh the extra cost of allowing people to keep payments for longer after finding work, he suggested. "When we look at figures for investment, we have to recognise that right now the present system costs significant amounts of money more each year - £60 billion in the last 10 years. "And because of its complexity, when you look at the way tax credits have to be administered, we know there are dramatic amounts of money that are overpaid each year and lost. "The first thing that happened when I walked through the doors of the Department of Work and Pensions was my officials said to us 'For goodness' sake, let's get on and reform this because we spend so much money holding together this complex system which is really, really on the verge of breaking down. Every day we worry that we simply will have a system breakdown and we will lose people as a result'." He went on: "We have done the maths. We are talking about the systems here; maths is for the White Paper when we come forward with the system we fully select." Asked if he had made the sums add up, he said: "I believe we have. And the Treasury have discussed this with us." Mr Duncan Smith appeared to signal that benefit rates could be varied across the country to reflect the different costs of living. Asked whether that could be a result of attempts to "localise" benefits, he told the BBC Radio 4 Today programme: "We want to talk to people from different areas to see whether or not they think they would prefer to see that." Top Back to List View