Conservatives: come off benefits and we'll make work pay
Jobless people who choose to come off benefits and go to work will no longer lose out financially under the biggest shake-up of the welfare system for decades.
By Andrew Porter, Political Editor
Published: 9:49PM BST 29 Jul 2010
https://teakdoor.com/images/imported/2010/07/1007.jpg Waiting game: job seekers outside a Jobcentre Plus branch in central London
Ministers want to end the “illogical” situation where people are effectively paid to remain unemployed because state benefits are more valuable than wages.
Iain Duncan Smith, the Work and Pensions Secretary, will announce a series of reforms today that are intended to ensure that low earners will always be better off in employment.
The measures are part of wider moves to cut the number of people who are dependent on benefits.The Government says the reforms represent the most radical transformation of the system in many years.
They are in a document that will form the basis of a White Paper to be published this autumn and herald the end of Labour’s complicated tax credits system, with many benefits being rolled into one.
“After years of piecemeal reform the current welfare system is complex and unfair,” the former Conservative Party leader will say in a speech on Friday.
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.”
Mr Duncan Smith says there are five million people who have been “abandoned on out-of-work benefits”. Of those, 1.4 million have been on benefits for nine or more of the past 10 years.
The document, 21st Century Welfare, will form the basis of Mr Duncan Smith’s attempts to cut the welfare budget by getting more people into work, although there are initial costs associated with his plans.
It now appears that he is on the verge of convincing George Osborne, the Chancellor, to fund the estimated £3billion required.
Officials from his department will meet Treasury colleagues to thrash out what can be afforded.
One key aim is to give the unemployed an incentive to get a job. Currently, some families lose more than £1 in benefits for every extra £1 they would earn at work.
The Government believes that because of the effect of “marginal tax rates” — the combination of withdrawn benefits and the tax on earned income — millions of people calculate that it is simply not worth taking a job.
One example cited by Mr Duncan Smith involves the case of a lone parent with three school-age children earning £7.50 an hour as an office administrator.
Working 23 hours a week, he says, she would have a net weekly income (including benefits and tax credits) of £345 after paying rent and council tax. However, if she were to increase her hours to 34 a week she would get only about £10 more due to a loss of benefits.
It is proposed that “entitlements” are tapered so that when earnings — net of tax and National Insurance — are not significantly above what a claimant would get on benefits, they are topped up by payments. Ministers want a system where claimants would be better off by up to 40p in every pound extra they earn.
As part of his efforts to make low-paid jobs worth taking, the Work and Pensions Secretary is looking to merge existing unemployment and in-work benefits with a “universal credit”.
To improve the incentive for low earners to get a job, the document says people entering work “would ideally see no reduction in their universal credit until they earn over a certain level”.
It aims to end the complexity that requires the Department of Work and Pensions to issue 14 manuals, comprising nearly 9,000 pages, to help guide those who make decisions on what benefits people are entitled to. The proposals also include changing the benefits system to make it more automated.
Conservatives: come off benefits and we'll make work pay - Telegraph
