Speaking in east London, Duncan Smith established his plans for welfare reform in the 21st Century Welfare white paper, published today. Options in the paper include combining elements of the current income-related benefits and tax credit systems, bringing out-of-work and in-work support together in a single system, and supplementing monthly household earnings through credit payments reflecting circumstances such as children, housing and disability.
The government claims the system will provide more incentive to work as benefits will be withdrawn more slowly alongside gaining employment. It will also be a simpler system, said Duncan Smith, which will allow for less error and fraud, which cost the taxpayer £5bn last year.
"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," said Duncan Smith. "We are proposing to change forever how the system works. Not tinkering around the edges but a fundamental change from top to bottom."
Imran Hussain, head of policy at Child Poverty Action Group, said the changes to the current system are long overdue.
"Much depends on the detail of any proposal but slowing down the rate at which benefits are removed when people’s incomes rise would help make work pay and help reduce ludicrous marginal tax rates paid by low-paid workers through higher tax and lost benefits," he added. But Hussain also warned that the government’s decision to withdraw funding for free school meals is likely to prove a disincentive for poor parents to work.
Save the Children also welcomed the proposal but called for investment to ensure benefits for the most vulnerable families are not cut. Sally Copley, Save the Children’s head of policy, also warned that the reforms will not be a cure to all child poverty.
"For some families work is not an option, for example, families with very young children or families affected by disability," she added. "For others, the barriers to taking up employment are not high marginal tax rates, but a lack of suitable jobs or a lack of childcare. Spending cuts could make this worse."
The proposals are now open for consultation until October.
