Press release

Calling time on benefits culture: work must always pay and be seen to pay

Millions of people abandoned on welfare will benefit from the most radical overhaul of the system in a century.

Millions of people abandoned on welfare will benefit from the most radical overhaul of the system in a century, as Work and Pensions Secretary Iain Duncan Smith set out plans today to revolutionise the existing benefits system.

Set out in a Command Paper entitled 21st Century Welfare are a series of options which focus on ensuring work always pays and is clearly seen to pay. They include allowing people to keep more of what they earn as they move into work whilst withdrawing benefits at a single, more reasonable rate as people start to earn more money.

Launching the paper at a visit to the Bromley by Bow centre in East London Iain Duncan Smith said:

A system developed to help the most vulnerable and support people in times of need is trapping people in a cycle of dependency. We now have children growing up in households where neither parent works and where the only future is one stuck on benefits. This is a tragedy that we must bring to an end.

We are proposing to change forever how the system works. Not tinkering around the edges but a fundamental change from the top to bottom. Making it easier to help people into work, fairer to those who pay for the welfare state and continuing to provide unconditional support to those who need it.

This will affect everybody which is why I want everyone with a view on the way forward to contribute. I believe these changes will make work pay and end the poverty of aspiration that has trapped too many people for generations.

The options in the document could see a major reform of the number and type of Tax Credits and benefits available and the way in which they are withdrawn when people move and progress in the workplace. They would:

  • Combine elements of the current income-related benefits and Tax Credit systems;
  • Bring out-of-work and in-work support together in a far simpler system.
  • Supplement monthly household earnings through credit payments reflecting circumstances (including children, housing and disability).

The system could improve incentives to get a job as people would see no reduction in their benefit until they earn over a certain level.

Over a certain level of income a taper would be applied to reduce benefit. This taper would apply to earnings, rather than number of hours worked.

It could remove the very high Marginal Deduction Rates, ensuring that work pays for everyone and encouraging people to progress in their employment by not limiting the hours people can work.

The payment system will be modern and automated, bringing it into line with the standards we would all expect from our banks, and will allow flexibility so that people can be assured of the right support even if they take on temporary work.

This simplified system could reduce the amount of fraud and error in the system and also lessen the amount of time customers need to spend filling out forms when a job ends.

The options in the paper are designed to ensure that welfare is sustainable for the future and in doing so guarantee that those who cannot work are not forced to and the vulnerable receive all the support they need.

During his visit to Bromley by Bow, Iain Duncan Smith also spoke to local people about the importance of bringing down the budget deficit and called on them to contribute by putting forward any ideas they have to the Treasury as part of the Spending Challenge

Notes to Editors:

  1. The Command Paper is available on the DWP website at: www.dwp.gov.uk/21st-century-welfare/
  2. The proposals set out within the document are open for consultation until 01 October 2010
  3. Iain Duncan Smith launched the proposals in a speech at the Bromley By Bow  Centre in East London.
  4. Contributions can be made to the Spending Challenge by going to the HM Treasury website at http://www.hm-treasury.gov.uk/spend_index.htm

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