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 |  Subject: UK Good News: Coalition to tear up benefits system and tax credits in biggest reform in decades  Sat Jul 31, 2010 9:35 am | |
| * Single benefit to be combined with salary to encourage unemployed back to work
* Thousands of middle class families to lose out as entitlements are withdrawn
* But Labour claims the reforms are designed to conceal massive budget cuts
The Government unveiled radical proposals to reform the UK's 'antiquated' benefits system today, pledging the biggest overhaul in decades in a drive to simplify the structure and make work pay.
Work and Pensions Secretary Iain Duncan Smith gave a critical account of the complex welfare system, which he said had helped create ghettos of worklessness, often affecting generations of families.
The current arrangements amount to a 'supertax' on some of the worst off in society, said the minister, adding that he feels a maths degree is needed to work out how to claim benefits.
Mr Duncan Smith’s command paper, called 21st Century Welfare, makes it clear that his aim is nothing less than tearing up the welfare system and starting from scratch.
It highlights how four or five separate benefits are withdrawn as people move off the dole and into work.
Mr Duncan Smith told a conference in east London today that five million people are on out-of-work benefits, with a 'staggering' 1.4 million on benefits for nine or more of the last 10 years, while the UK has one of the highest rates of workless households.
One in six children will grow up in a workless household, said the minister, adding that up to three generations of the same family are now growing up with no work in their lives.
For 130,000 people, the effect of working more than 16 hours a week is to remove 90p out of every extra pound they earn. Some 1.9million people lose 60p in every additional £1 they earn.
The proposals spell the end for Gordon Brown’s cherished system of tax credits, which critics say are too costly and vulnerable to error and fraud.
The command paper explores several options, but Mr Duncan Smith’s preference is a so-called ‘universal credit’.
Housing benefit, income support, council tax benefit, working tax credit and child tax credit would be replaced by a single benefit, which would be withdrawn at a uniform rate so people trapped on welfare would have a clear and rewarding path back to work.
The reform would initially be expensive – requiring about £3billion in investment, which is likely to pitch the Work and Pensions Department into a battle with the Treasury.
The paper explores cheaper options, including a single taper rate for all benefits; a single working-age benefit, replacing all others and non-means-tested for the first 12 weeks; and the so-called Mirrlees model, which streamlines family credits and benefits into a new ‘family allowance’ benefit.
Mr Duncan Smith said today 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 benefits system has created pockets of worklessness, where idleness has become institutionalised. The welfare budget is spiralling out of control, up from £63 billion in 1996-97 to £87 billion in 2009-10, although the actual increase was £61 billion in the last 10 years.
'The key must be to break the cycle of dependency. We must make sure that work pays, even for the poorest."
Mr Duncan Smith said the benefits regime often provides little incentive to work, meaning that some people would be taxed on the first eight or nine hours of the first 10 hours they work, describing it as a 'supertax'.
There are 14 manuals dealing with benefit claims, and one adviser recently spent 45 minutes on a computer with a lone parent before discovering she would be better off working, he said.
The system cost £3.5 billion to administer, while a further £5 billion was lost in fraud or errors, which are 'staggering' amounts.
'We need nothing less than a complete rethink of the benefits system. A new regime to replace the current complicated system. We have a rare opportunity to reinvent our antiquated welfare system to reflect the nature of what people need.'
http://www.dailymail.co.uk/news/article-1298830/Coalition-tear-welfare-Tax-credits-biggest-reform-decades.html?ITO=1708&referrer=yahoo#ixzz0vA2FtZYE |
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