Welfare reform bill will see benefits combined into a single universal credit, but plans to cut housing benefit are ditched
The welfare reform bill will replace the complex array of benefits with a single universal credit, create a work programme to help the long-term unemployed into jobs and introduce incentives and sanctions to ensure that work always pays, said the prime minister.
But the government has ditched controversial proposals announced in last year’s emergency budget to cut housing benefit by 10% for anyone on jobseeker’s allowance for more than 12 months.
Cameron said the changes would slash £5.5bn from the welfare bill in real terms over the next four years by limiting housing benefit, reforming tax credits and taking child benefit away from higher-rate taxpayers.
He insisted that the bill was “not an exercise in accounting – it’s about changing our culture”.
Speaking in east London alongside the architect of the reforms, the work and pensions secretary, Iain Duncan Smith, Cameron said: “Never again will work be the wrong financial choice. Never again will we waste opportunity.
“We’re finally going to make work pay – especially for the poorest people in society.
“And we’re going to provide much greater support for unemployed people to find work – and stay in work.
“We’re not just recasting the reach, scope and effectiveness of the old system – making it fairer and a genuine ladder of opportunity for everyone. We’re also doing something no government has done before – and that is get to grips with the cost of welfare.”
But the reform package has come under attack from unions, who accused the coalition of punishing the unemployed and impoverished for their own misfortunes.
“Long-term unemployment has doubled not because of a sudden increase in work-shy scroungers, but as an inevitable result of economic policies based on cuts that destroy growth,” said the TUC general secretary, Brendan Barber.
“Making low-income working families thousands of pounds worse off through welfare cuts over the next two years to claim that they will be slightly better off in 2013 is an absurd argument that will ring hollow as families suffer the toughest income squeeze for nearly a century.”
Cameron described the package of welfare reforms as “tough, radical… but fair”.
He said that while encouraging people – including those with disabilities – to seek employment, the new system would also guarantee support for those who are genuinely unable to work.
“Those who can, should; but, of course, those who can’t, we always help,” he said.
“I passionately believe that the welfare system should be there to support the needy and most vulnerable in our society and provide security and dignity for those in old age.
“That’s why the system was born, that’s what it’s always done – and with me, that’s the way it will always stay.
“But that doesn’t mean the welfare system shouldn’t change. It has to change – because it just isn’t working.”
Cameron said the £90bn annual welfare bill accounted for one in every £7 spent by the government and was not sustainable in the current economic circumstances.
And he said perverse incentives and complexities within the existing system had “insidiously drained hope away from swathes of our society” and actively encouraged people to behave in ways which were irresponsible.
Cameron said the bill would “put responsibility back into the welfare system” by simplifying benefits and making work pay, creating tougher sanctions and limits on benefits and building a more responsive welfare-to-work scheme.
The universal credit will ensure those coming off welfare or increasing hours can keep 35p of benefits for every extra £1 they take home, benefiting an estimated 1.5 million low-earners.
Housing benefit will be restricted to cover only the cheapest 30% of homes in an area and there will be limits on the amount that can be claimed by families of a particular size.
The authorities will seek prosecution for fraud whenever possible, with a tough minimum fine for those cheating the system.
And unemployed people who refuse to take a reasonable offer of a job or voluntary work will lose benefits for three months on the first occasion, rising to three years if it happens three times.
Cameron said: “This is about the beginning of cultural change. A new culture of responsibility.
“We say: we will look after the most vulnerable and needy. We will make the system simple. We’ll make work pay. We’ll help those who want to work, find work.
“But in return we expect people to take their responsibilities seriously too. To look for work. To take work. To contribute where they can.
“It is a vision of a stronger society, a bigger society, a more responsible society, and today the building of that society starts in earnest.”