From BBC News, 17 February 2011
The government is promising to make poor people “better off” as it sets out plans to ensure those in work are paid more than the unemployed.
A “universal credit”, sanctions for those turning down jobs and a cap on benefits paid to a single family will be among the changes outlined.
But ministers have dropped plans to impose a 10% housing benefit cut for anyone unemployed for more than a year.
Labour back some changes but say help for people to find work is inadequate.
It has criticised the government's back-to-work programme, a centrepiece of the package, saying thousands of young people are being “betrayed” at a time of record youth unemployment.
Ministers will explain how they plan to reshape the welfare system to try to ensure people are better off in work than on benefits, to simplify its operation and to help people get jobs.
They say the fact that five million people of working age are on out-of-work benefits, 1.4 million of those for nearly a decade, while unemployment has become entrenched in many communities shows that the current system is not working.
Work and Pensions Secretary Iain Duncan Smith said it used to be the case that most new jobs were taken by people from overseas because “our own people, young and middle-aged, wouldn't take and couldn't take those jobs”.
“That will be a thing of the past,” he said.
“What will happen is British people will genuinely be able to get British jobs because they will be incentivised to take those jobs. We will expect them to take those jobs – work will pay better than benefits.
“A life on benefits will no longer be an option for somebody. Right now there are huge numbers of people sitting on benefits, sometimes in rented accommodation that people who work could never dream of affording.”
On dropping the plans to reduce housing benefit for the long-term unemployed, Mr Duncan Smith told BBC Radio 4's Today programme it would “not be” in the Welfare Reform Bill.
He said: “Nobody will be worse off [under the changes]. They will be cash-protected.”
Mr Duncan Smith also said: “The universal credit will make sure that the poorest in society will be better off.”
The key changes are expected to include:
Single universal credit to come into force in 2013
Tax changes to enable people to keep more income
Changes to the disability living allowance
More details of the back-to-work programme
Those refusing to work face maximum three year loss of benefits
Annual benefit cap of about £26,000 per family
Review of sickness absence levels
Central to the plan is the creation of a universal credit, a process which will begin in 2013 and continue into the next Parliament.
Moving people onto a single payment, ministers believe, will make it easier for them to claim benefits, demonstrate the value of being in work, reduce administrative costs and the risk of fraud.
Ministers say the current system actively discourages claimants from looking for work, or those on low-paid jobs from increasing their hours, as rates of tax and benefit reductions leave them worse off.
In future, the government is guaranteeing that for every £1 extra people earn, they will be at least 35p better off as a result of being in work.
Up to 2.7 million households will be better off as a result of the changes, ministers say, with more than a million of these – including many of the poorest – seeing an increase of £25 a week.
But the Institute for Fiscal Studies has warned that while the changes could benefit 2.5 million households, a further 1.4 million – including many lone parents and families with savings of more than £16,000 – face being worse off.
Ministers say transitional arrangements will be put in place to make sure no-one is worse off while they are being migrated to the new system – which will cost £2.1bn up front to introduce.
That short-term cost, ministers insist, will reap considerably higher savings in the long term.
Labour supports efforts to simplify the system and back “conditionality” on benefits but says people should not be penalised for being unable to find work and has criticised the proposed maximum £26,000 cap on benefits – likely to affect 50,000 families – as a dangerous gimmick.
Critics say the overhaul, combined with cuts to housing benefit for those on Jobseeker's Allowance for more than a year, could leave vulnerable people worse off.
“To reduce the housing allowance for those out of work means punishing people for failing to find a job in a very difficult job market,” said David Orr, chief executive of the National Housing Federation.
“The proposal is unfair, unjust and will heap further misery onto households already under huge financial pressure. People should be encouraged into work, but threatening the roof over the head of those who are unemployed isn't the right way to go about it.”