Benefits system overhaul 'to make work pay'

Iain Duncan Smith: The changes will bring welfare 'into the 21st century'

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The biggest welfare shake-up since the 1940s will make going out to work pay and see benefit cuts for those who refuse to take jobs, ministers say.

Work Secretary Iain Duncan Smith plans to bring in a single Universal Credit to replace work-related benefits.

Claimants moving into work will keep more of their income than now, but face losing benefits if they refuse a job.

Labour said it backed moves to make work pay but warned about the possible lack of available jobs.

The new system will mostly be administered through the internet, with people expected to make claims online and check their payments like they would an online bank account - even though an estimated 1.5 million unemployed people do not currently have internet access, according to government figures. The DWP says a "minority" of cases will still be dealt with face-to-face.

Unveiling his white paper on welfare reform in the Commons, Mr Duncan Smith said the current system was hugely complex and costly to administer, vulnerable to fraud, and deterred people from finding a job or extending their hours.

'Real time'

Mr Duncan Smith, who campaigned for root-and-branch welfare reform while in opposition, said millions of people had become "trapped" on benefits and long-term unemployment had become entrenched in communities where generations of families had not worked for years.

UNIVERSAL CREDIT - KEY POINTS

  • Low paid workers to keep more of what they earn
  • Replaces working tax credit, child tax credit, housing benefit, income support, jobseekers' allowance and income related allowances
  • Benefits cut for three months if job offers refused - and for up to three years in the most 'extreme' cases
  • People can move in and out of work without losing benefits
  • Starts for new claimants in 2013
  • Will take up to 10 years to come fully into effect
  • £2.1bn start up costs
  • Meant to save money in the long run through reducing fraud and error

He proposes consolidating the existing 30 or more work-related benefits - including jobseeker's allowance, housing benefit, child tax credit, working tax credit, income support and employment support allowance - into a single universal payment.

There will be tougher penalties for people fit to work but unwilling to do so. A sliding scale of sanctions will see those refusing work on three occasions having their benefits taken away for three months. Those repeatedly convicted of benefit fraud could have their benefits stopped for three years.

Mr Duncan Smith insists no one will experience a reduction in the benefit money they receive as a result of the introduction of the Universal Credit.

Universal Credit claimants will receive a basic personal amount with additional sums for disability, caring costs, housing costs and children, with single people and couples getting different rates and, as now, the under 25s receiving less. Unlike now, people will not have to claim separately for different benefits.

The amount claimants receive will also be calculated closer to "real time", with adjustments potentially made monthly rather than annually. Mr Duncan Smith rejected newspaper reports that this part of the scheme would be scuppered by delays in linking up his department's IT systems with HM Revenue and Customs' PAYE system.

State support

Setting out his proposals in the Commons, Mr Duncan told MPs he was determined to "ensure people will consistently and transparently be better off for each hour they work and for every pound they earn".

The new rules are likely to come into force for new claimants by 2013, with a target of migrating all recipients onto it in the first few years of the next Parliament after 2015.

BENEFITS NOT BEING SCRAPPED

  • Disability living allowance
  • Child benefit
  • Contributory Jobseekers Allowance
  • Statutory sick pay
  • Maternity pay and maternity allowance
  • Industrial injuries disablement allowance

Ministers want to make sure it pays to take jobs, so people will keep more of their benefits for longer when in work, with state support withdrawn in a less abrupt and more transparent way.

People coming off welfare into work would lose 65p of each pound they earn on top of their benefit - better than the current rate but 10% less generous than Mr Duncan Smith had been calling for when he was in opposition.

Mr Duncan Smith told MPs it still meant the poor would be better off "as they work through the hours" and the taper rate could always be varied by future governments.

Poverty fears

Officials believe that up to two million people will be better off as a result of the changes, which will cost an estimated £2bn to implement over the next four years.

But not all benefits will be replaced by the Universal Credit - and the government has yet to decide the best way to pay for childcare under the new system.

Benefits that will be unaffected by the changes include Child Benefit, Disability Living Allowance and Contributory Jobseekers Allowance, which is paid for the first six months of being unemployed out of National Insurance contributions.

Analysis

The plans for welfare reform mark a key moment - not merely for Britain's five million out of work claimants - but also for the Coalition.

Cutting the benefits bill is key to reducing public spending - and so central to the government's long term aim of ensuring Britain can live within its means.

It is also integral to the political philosophy of this Coalition and central to Mr Cameron's stated desire to mend the so called Broken Society.

Both David Cameron and Nick Clegg believe that in too many households families have not worked for generations, and have thereby doomed their children to a life of poverty and blighted prospects. The way to tackle this, they believe, is through encouraging and - if necessary - forcing these people back into work.

The success or failure of today's welfare reforms, may well shape the success or failure of the Coalition's economic and political agenda.

Disability charity Scope has expressed fears that changes requiring more disabled people to undertake some work, if they are able, could drive more disabled people into poverty.

But Mr Duncan Smith said: "We are not in the business of punishing people who can't take work."

And he hit back at claims there were not enough jobs in the current economic climate for the plan to work, saying there were 450,000 vacancies "even as the country is coming out of recession".

Ahead of his Commons statement he told reporters during a visit to a centre for homeless men in North London that creating jobs was "vital" but tackling the culture of worklessness was more important, as the country could not afford for it to continue.

"In prosperous times this dependency culture would be unsustainable but today it's a national crisis," said Mr Duncan Smith.

He said 70% of the four million new jobs created during one of the longest economic booms in history had gone to foreign workers, while 4.5 million British people continued a life on benefits.

"Businesses had to bring people in from overseas because our welfare system did not encourage or even assist people to take those jobs," said the minister.

He said the reforms would reduce the number of workless households by 300,000 and make work pay for 700,000 low earning employees.

'Soup kitchen'

Deputy Prime Minister Nick Clegg, the Lib Dem Leader, has backed the reforms, calling them "the most radical overhaul of our welfare system since its inception".

People in Rochdale give their views about changes to benefits

Labour has said it will co-operate with the government where it is rewarding work but stressed there must be jobs for people to take up.

"If the government gets this right we will support them because, of course, we accept the underlying principle of simplifying the benefits system and providing real incentives to work," Shadow Work and Pensions Secretary Douglas Alexander said.

"But the government will not get more people off benefits and into work without there being work available. We back real obligations for people receiving out of work benefits but these should be matched by guarantees of real work."

The Unite trade union warned the coalition's reforms would create "a US-style 'soup kitchen' culture".

"Already in America, we can see the social and human agonies caused when welfare is withdrawn at a time when dole queues are lengthening," said a spokesman.

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  68.  
    12:19: Stuck in the middle? House of Commons Parliament

    Liberal Democrat MP Stephen Gilbert is next up after the prime minister's tussle with Ed Miliband. He invokes Stealers Wheel hit Stuck in the Middle with You, saying there are "clowns to the left of me, jokers to the right".

     
  69.  
    Robin Brant, BBC Political Correspondent

    tweets: Did I just hear correctly, @Ed_Miliband accused PM of having a 'war on wales' ?

     
  70.  
    12:17: Leaders clash House of Commons Parliament

    More angry exchanges between the leaders. After David Cameron calls the Opposition "completely useless", Mr Milband says there are "99 days to kick out a prime minister who has broken all his promises on the NHS".

     
  71.  
    @iainmartin1 Iain Martin, political journalist

    Even by the standards of #PMQs this is dire.

     
  72.  
    @ShippersUnbound 12:16: Tim Shipman, Sunday Times political editor

    Tweets: Michael Gove doing a good impersonation of the Churchill dog, nodding judiciously as Dave speaks

     
  73.  
    @DavidJonesMP 12:15: David Jones, Conservative MP

    tweets: Remarkably, Miliband raises Welsh NHS; silly, silly.

     
  74.  
    @tombradby Tom Bradby, ITV News political editor

    Tweets: Ed is normally pretty good at PMQs, but he looks a bit flustered today. This issue over the word 'weaponise' is tricky.

     
  75.  
    12:14: Miliband v Cameron House of Commons Parliament

    David Cameron is now questioning Ed Miliband's motives about the NHS. "He told the political editor of the BBC he wants to weaponise the NHS, so I ask him again: get up there and withdraw." Miliband responds - "I'll tell him what my motive is: it's to rescue the National Health Service from this Tory government."

     
  76.  
    12:12: Picture: Ed Miliband asking question
    Ed Miliband in the Commons
     
  77.  
    12:13: House of Commons Parliament

    Now we're on to this morning's story about "major incidents" being declared by NHS trusts. Mr Cameron says the new guidance on when one can be declared was issued by the NHS in the West Midlands, "without any instruction" from ministers or the Department of Health.

     
  78.  
    12:10: Miliband v Cameron House of Commons Parliament

    Ed Miliband is asking about David Cameron's "bare knuckle fight" to preserve A&E and maternity units. The PM responds by returning to the Labour leader's comment - to BBC political editor Nick Robinson - about wanting to "weaponise" the NHS. He demands an apology, Mr Miliband says it is a "ridiculous smokescreen".

     
  79.  
    @iainjwatson Iain Watson, BBC political correspondent

    Tweets: No surprise that Ed Miliband goes on the #NHS consistently top of voters concerns according to polls

     
  80.  
    12:09: Picture: Ed Miliband House of Commons Parliament
    Ed Miliband
     
  81.  
    12:08: Cigarette packaging Robin Brant Political Correspondent, BBC News

    The Prime Minister's official spokesman has refused to say directly if David Cameron supports moves to bring it in The government has pledged to give MPs a vote on new regulations before the election. Asked if the PM was concerned about the prospect of a rebellion by some of his own MPs the spokesman said: "The right thing to do is to proceed as the government has set out for some considerable time."

     
  82.  
    12:06: Labour's Eds listen to first answer
    Ed Balls and Ed Miliband
     
  83.  
    12:06: NHS at PMQs House of Commons Parliament

    The NHS gets its first PMQs mention in question two, from Labour MP Lilian Greenwood who suggests the health service is not a priority for David Cameron. The PM says the government has invested in the NHS and attacks Labour's record in Wales.

     
  84.  
    @MartynExpress Martyn Brown, Daily Express political correspondent

    Tweets: Women on front bench - Tories 8 v Labour 8 #pmqs

     
  85.  
    12:05: Picture: Cameron takes first question
    David Cameron
     
  86.  
    12:04: Picture: Frank Field House of Commons Parliament
    Frank Field Labour MP Frank Field asks when the Chilcot inquiry report will be published
     
  87.  
    12:04: PMQs under way

    Labour MP Frank Field gets Prime Minister's Questions up and running, asking about delays to the Iraq War inquiry. David Cameron says he too is frustrated at the timing.

     
  88.  
    12:04: UKIP defector James Landale Deputy Political Editor, BBC News

    James Landale says most voters won't be too bothered by the negative stories emerging about Amjad Bashir, the former UKIP MEP who has defected to the Tories. He says: "As ever with defections, they are never as clean as political parties would like. The problem for UKIP is that most voters are less aware of the detail that goes on underneath."

     
  89.  
    @nedsimons 12:03: Ned Simons, Huffington Post UK assistant political editor

    Tweets: Can't wait for Miliband and Cameron to shout NHS statistics at each other for ten minutes. #PMQs

     
  90.  
    12:01: Miliband's only PMQs option: The NHS James Landale Deputy Political Editor, BBC News

    James Landale on the Daily Politics says he thinks the Labour leader will focus all six of his questions on the NHS. "I would be amazed if Ed Miliband doesn't go on health - that's his subject of the week, he has to go on it. "

     
  91.  
    12:00: Immigration target Daily Politics Live on BBC Two

    Earlier on Daily Politics David Willetts was pressed by Andrew Neil to accept that the Conservatives have failed on immigration. Ministers had sought to cut net migration below 100,000. Mr Willetts suggested a Tory-only government might have made more progress, saying: "We had a commitment in our manifesto which was not part of the coalition agreement and therefore not the basis on which the government was to act."

     
  92.  
    12:00: NHS England BBC News Channel

    Dr Barbara Hakin, national director of commissioning operations for NHS England, says: "Local hospitals continue to have responsibility for deciding whether to declare major incidents, but before doing so best practice dictates that they take account of the wider impacts on other parts of the NHS so that patient safety in the round is protected. That's why NHS England's local area team in the West Midlands decided to issue these guidelines. This was not a decision of the Department of Health."

     
  93.  
    12:00: Major NHS incidents BBC Radio 5 live

    John Pienaar tells 5Live that Guidance to NHS Trusts on declaring a major incident will surely feature during PMQs

     
  94.  
    11:57: EU-US trade deal

    Trade minister Lord Livingston is facing questioning about the EU-US trade deal which many fear could reduce Britain's control over the NHS. Around 150,000 people responded to a recent EU consultation on the issue voicing their concerns, most of them negative. But Lord Livingston, a strong supporter of the deal, is not concerned. "Ninety-seven per cent of the responses were standard," he says. "I'm not entirely sure that represents the totality of everyone's views. However, it's important we recognise everyone's concerns."

     
  95.  
    11:55: 'No-go areas' Daily Politics Live on BBC Two

    Quentin Letts, the Daily Mail sketchwriter, is on BBC Two's Daily Politics talking about the issues the political parties would rather steer clear of. Neither the Conservatives nor Labour want to discuss Trident, he claims, while the Liberal Democrats are keen to avoid talking about anything connected with tuition fees. "There are issues that are of great interest to the voters, and yet the politicians are shying away from it," Letts says. "It's totally unsustainable, particularly with such a long election campaign."

     
  96.  
    11:52: 'Responsibility of the government' House of Commons Parliament

    Shadow Northern Ireland secretary Ivan Lewis cautions MPs on the government side about "believing everything that you read in the Sun" concerning alleged contacts between Labour and Sinn Fein.

    Conservative Andrew Robathan had suggested that Labour should speak to Sinn Fein about security in Northern Ireland.

    Mr Lewis says that Conservatives are asking that "the Labour party take responsibility for things that are clearly the responsibility of the government".

     
  97.  
    11:46: Daily Politics line-up

    Joining Andrew Neil and Jo Coburn on Daily Politics are ex-Conservative minister David Willetts and Labour's shadow minister Caroline Flint. They are discussing the suggestion that up to 100 Conservative MPs might oppose the plan to bring in standardised (plain) cigarette packaging.

    Daily Politics
     
  98.  
    11:42: Labour and Sinn Fein House of Commons Parliament

    Conservative MP Andrew Robathan asks about a story, reported in the Sun, that "the Labour party have been talking to Sinn Fein about a possible link-up after the election".

    A cry of "absolute rubbish!" is heard from the Labour benches.

     
  99.  
    11:38: Northern Ireland questions House of Commons Parliament

    Northern Ireland questions have begun in the Commons. The first question is from Labour MP Tom Greatrex, about the the security situation in Northern Ireland. NI Secretary Theresa Villiers tells him the threat level remains "severe" but there have been "a number of significant arrests, charges and convictions".

     
  100.  
    @EmmaReynoldsMP 11:32: Emma Reynolds, shadow housing minister

    tweets: Since 2010 we have been building 356 fewer homes than we need - Gov't is presiding over the lowest level of house building since 1920s.

     

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