THE UNITED Kingdom welfare system is now trapping millions into poverty and must be completely overhauled, the new work and pensions secretary, former Conservative leader Iain Duncan Smith, will declare today.
Nearly one-and-a-half million on welfare benefit have claimed it for nine of the last 10 years, while income inequality in the UK is now at its worst since statistics began to be collected nearly 50 years ago.
“A system that was originally designed to help support the poorest in society is now trapping them in the very condition it was supposed to alleviate. Instead of helping, a deeply unfair benefits system too often writes people off,” Mr Duncan Smith will say, according to a draft last night.
“The proportion of people parked on inactive benefits has almost tripled in the past 30 years to 41 per cent of the inactive working age population. That is a tragedy. We must be here to help people improve their lives not just park them on long-term benefits.
“We must not underestimate the challenge ahead. One of the biggest problems is that for too many people work simply does not pay. For many people, the move from welfare into work means they face losing more than 95 pence for every additional one that they earn.
“As a result, the poor are being taxed at an effective tax rate that far exceeds the wealthy. We have in effect taken away the reward and left people with the risk. That must and will change.”
A new cabinet committee is being set up, chaired by Mr Duncan Smith, to tackle the underlying causes of deep-rooted poverty.
Under the coalition deal, the Conservatives and Liberal Democrats have agreed that everyone on incapacity benefits is to be reviewed medically, and those who are no longer deemed to qualify will be moved onto the much-lower jobseeker’s allowance and given help in how to get to work.
The appointment of Mr Duncan-Smith to the cabinet by prime minister David Cameron caused some surprise earlier this month, though Mr Cameron has a high regard for the work done by Mr Duncan Smith at the Centre for Social Justice – a think tank he founded after he was ousted from the Conservative leadership.
However, there are already fears that the cost of some of the government’s ambitions to reform state pension rules could dramatically cut the benefits paid to those of working age claiming benefits. The coalition has vowed to increase pensions in line with earnings, prices or by 2.5 per cent – whichever is greater – which could cost £300 million this year alone.
Higher pension costs will come at a time when the total welfare budget is facing pressure, since the Institute for Fiscal Studies has already estimated that £12 billion needs to be cut as part of the contribution needed to tackle the UK’s deficit.
Some details of the cuts affecting the welfare budget are expected when the chancellor of the exchequer George Osborne announces his emergency budget on June 22nd.
Institute of Fiscal Studies senior economist Gemma Tetlow said all the parties in the election had stood by commitments to improve pensions, though they will have to find cuts from other welfare benefits to pay for them: “If the government did not want to cut pension spending, it would have to find cuts elsewhere in the welfare budget.”