THE BIGGEST welfare reforms the United Kingdom has seen since the establishment of the welfare state after the second World War will guarantee that work always pays, the government has insisted. However, opponents have charged that the reforms could make hundreds of thousands of people destitute.
Under the plan, introduced by work and pensions secretary Iain Duncan Smith, dozens of benefits will be scrapped and replaced with one universal credit that will be withdrawn gradually if a claimant manages to find full-time, or part-time work.
The rate of that withdrawal, however, will not discourage the individual from taking up, or staying in the job, he said.
Four million jobs were created by the Labour Party, Mr Duncan Smith said, but almost three-quarters of them were filled by foreigners “because people in this country weren’t capable or able to take those jobs”.
Of the five million people on out-of-work benefits, 1.4 million have claimed for nine of the last 10 years, he said.
The measures will add more than £2 billion (€2.35 billion) to the UK’s welfare bill in the short term, Mr Duncan Smith said.
He said 2.5 million households would get more from the universal credit and it would lift more than 300,000 families out of long-term unemployment. Half a million adults and 350,000 children would be lifted out of poverty, he said.
Currently, people who leave welfare for a job can lose up to 95.8 per cent of their income because of the losses suffered from the withdrawal of benefits.
Under the new plan, they will keep 35p in every £1 they earn, though Mr Duncan Smith’s hopes of setting that figure at 45p failed in the face of treasury opposition.
People refusing to take up jobs, however, will face the loss of three months’ benefits for the first refusal, rising to three years if they continue to do so. Those who make fraudulent claims will also be subject to a “three strikes and you’re out” rule. Compulsory community work will flush out those working in the black economy, he said.
“We have a system that traps people, because it is complex, there are so many benefits withdrawn at different rates. People going back to work don’t fully understand whether they are better off or worse. It is almost impossible to make that calculation. By simplifying and having one withdrawal rate we will actually make sure people will retain more of what they earn as they go back to work,” he said.
Oxfam, Save the Children and trade unions expressed doubts about the measure, but Labour, which has also accepted that major welfare reform is necessary, has been more nuanced in its reaction, conscious that middle-ground UK public opinion is in favour of such reform.
Oxfam’s Kate Wareing said: “Changes to the benefits system proposed today will expose people to the risk of destitution. Removing benefits and leaving people with no income will result in extreme hardship for them and their families. The proposals to force people to do unpaid work are based on stigma.”
Save the Children said children will be hurt if parents refuse a job offer because they have no childcare.
“It is the children who will suffer when the safety net is withdrawn for three months, living in homes where mums and dads already struggle to put a hot meal on the table or buy a winter coat.”
FIFTY TO ONE UK BENEFITS OVERHAUL
MORE THAN 50 welfare benefits, including working tax, child credits and housing benefits will be abolished and replaced with one universal benefit. This will be reduced gradually once a claimant gets work, so that people will always be better off in a job.
Claimants will be able to hold on to most or some of their benefits if they accept low-wage jobs.
Benefits will be cut for three months if a job is refused and for longer periods thereafter if the claimant continues to decline available posts.
Fraudsters will lose benefits for three months for a first offence, six months for a second and three years for a third under a "three strikes and you're out" rule.
Claimants will get a basic sum, topped, if necessary, with extra payments for disability, care and housing costs and children.
Most of the new rules are due to come into force between 2013 and 2017, though it could be the end of the decade before they are set up. Their success will depend on a new revenue and customs PAYE computer system, which will be able to calculate tax and benefits on a weekly basis.
Mark Hennessy