LONDON, July 30, (RTRS): A complex web of benefits for the unemployed and low paid could be replaced with a single payment under plans to overhaul Britain’s £87 billion ($136 billion) welfare system, the government said on Friday.
The annual welfare budget has ballooned from £63 billion in 1996/97 and the Liberal-Conservative coalition, under pressure to tackle a budget deficit running at 11 percent of national output, has already taken several steps to cut welfare payments.
But launching a consultation of proposed reforms, Work and Pensions Minister Iain Duncan Smith said the system was “close to breaking” and needed a complete overhaul as it was inefficient, over-complicated and did not provide people with the incentive to find work.
“The benefit system has created pockets of worklessness where idleness has almost become institutionalised,” he said.
“We need nothing less than a complete rethink of the benefit system. Tinkering with it, adding to it, subtracting from it, simply will not do.”
Around 1.4 million of the 5 million people on out-of-work benefits have been receiving them for nine of the last 10 years.
Duncan Smith said making changes to the way benefits are withdrawn as people move in to work would help end the situation where some risk losing out financially if they take a job.
The cabinet’s plans include bringing out-of-work benefits and in-work tax credits together in to one “universal credit” which would supplement household earnings through credit payments reflecting circumstances such as children and housing.
Also proposed is a single withdrawal rate to make it clearer and simpler to calculate the financial gains from taking a job, and a tapered removal of benefits which would mean people see no reduction until they earn over a certain level.
The coalition, elected in May, will set out plans later this year to cut ministries’ departmental spending by around 25 percent. Finance minister George Osborne has said cuts could be tempered if more welfare savings can be found.
Simplifying benefits and making the payments system more automated would help cut the £3.5 billion a year spent on administering it, Duncan Smith said, as well as reducing the cost of fraud and error, currently around £5 billion a year.
Duncan Smith said that following the consultation, the government planned to bring forward legislation in early 2011.
“Today is the beginning, I hope, of the end of this antiquated, piecemeal, multi-factional system of benefits that actually benefits very few people and leaves all of us with higher and higher bills to pay for those who are without work,” he said.