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Why Liberal Democrats should welcome the welfare reforms

November 16, 2010 11:35 AM
By Steve Webb MP - Minister of State for Pensions in Liberal democrat Voice

Many Liberal Democrats may be wondering what to make of last week's announcement by Iain Duncan Smith to replace a whole raft of working-age welfare benefits with a Universal Credit. As a Lib Dem Minister at the DWP, I thought it would be helpful to offer my perspective. As a party we have long talked about integrating the tax and benefits system. As a first step, we surely need to integrate the benefits system with itself. The Universal Credit approach sits comfortably with our own policy to introduce a single working-age benefit, and will provide a basic allowance topped up by additional elements payable to meet the costs arising from caring and family responsibilities, and disability and housing needs.

It will seek to support people both in and out of work, and will replace tax credits, housing benefit, income support, income-based Jobseekers Allowance and income-related Employment and Support Allowance. For anyone who has ever had to help constituents with tax credits under-payments and over-payments, the prospect of streamlining this system is a big prize.

I believe that we can emphasise some real advantages to these reforms:

■ This policy is about supporting people, especially those on the lowest incomes. The Government has pledged to spend £2 billion on these reforms in the period up to 2014-15;

■ Labour's efforts to reform welfare over the last 13 years created greater complexity in an already bewildering system, with increased form-filling, mass means-testing, and the undermining of incentives to save. The Universal Credit will streamline and simplify the system so that people are better able to know where they will stand if they take a job;

■ With a single benefit, take-up will clearly improve, helping to reduce in-work poverty;

■ Current high withdrawal rates of benefits as someone enters work or increases hours means that many are afraid to change their circumstances in case they end up with less money at the end of the week;

■ Under the new rules, people will be able to keep much more of their wage before the benefit taper kicks in - this may be especially helpful to some disabled people who may find part-time work is most suitable;

■ There will be no cash losers - where the new, simpler system would produce a lower entitlement than the present system, current recipients will be protected.

Two areas where Liberal Democrats may have questions are sanctions and mandatory work activity.

The media has focused on the most severe of the proposed sanctions, but the whole point of sanctions is that they act as a deterrent. The most severe sanctions are intended only to be applied in exceptional circumstances where people systematically and repeatedly abuse the system. There are appeal rights if people feel sanctions have been applied unfairly and there remains a system of hardship support for the most vulnerable.

The use of sanctions will be up to the discretion of Jobcentre Plus advisers. They will use their judgement as to whether someone has a genuine reason for not taking a particular job, such as that it cannot be made to fit with their childcare arrangements.

Mandatory work activity will also be at the discretion of the Jobcentre Plus adviser, and is aimed at a small group of people who have been stuck on benefit and are feeling completely demoralised. The adviser will have to believe that it is in the interests of the individual concerned to try something different.

This will be a time-limited four week period of activity that aims to break the spiral of despondency; to get people out of the house, into a routine, put something new on their CV and see that they are contributing to society. It is not intended to be a job in itself, nor as a sneaky way of replacing paid jobs that are being cut elsewhere in the system. Getting someone involved in community work on a committed basis for four weeks will also have an impact on the minority who are quietly working whilst claiming out-of-work benefits.

All the details of the proposals are set out in the White Paper, and will come before Parliament in a Welfare Reform Bill in 2011. These changes will reduce child poverty, improve benefit take-up, provide a better return to work and more security for those who take a job, without reducing support overall for those who are unable to work. I believe that Liberal Democrat campaigners should be happy to tell their constituents about these plans as one of the positive achievements of the Coalition government.