Reform Bill to Simplify Welfare System

The Welfare Reform Bill passed through its third reading in the commons on Wednesday, with a government majority of 50, with the proposals designed to simplify the benefits system and its administration.

The bill was presented to parliament on February 16, and had its second reading on March 9.

The bill proposes the introduction of a ‘universal credit’ to replace existing means-tested benefits and tax credits, with the aim of improving work incentives, simplifying the benefits system, and tackling administrative complexity.

Other significant reforms proposed by the bill include replacing the current Disability Living Allowance with the Personal Independence Payments; amending the forthcoming statutory child maintenance scheme; and capping the total amount of benefit that can be claimed.

Speaking at the commons on Wednesday, Iain Duncan Smith, Secretary of State for Work and Pensions, emphasised the “balance of fairness” that he hoped the reforms would achieve:

“This is not about punishing people; it is about establishing a principle that fairness runs through the whole of the benefit system.”

He said: “Universal credit is about helping to improve people’s incomes when we get them back into work with a bigger incentive.

“We are striking a fair balance by doing all that while also placing some expectations on those who are waiting to go to work.”

He added: “The bill places a level of responsibility back into the system by strengthening our conditionality and sanctions regime and requiring all claimants to accept a claimant commitment setting out their individual responsibilities.

“That is fair.”

He acknowledged that the bill needed to tackle the complexity of the welfare system:

“Many claimants I have spoken to out there are completely confused about what they should or should not be doing.”

Reforms necessary, but not sufficient

In a report published in anticipation of the bill’s second reading in the commons in March, Nigel Meager, Director of Institute for Employment Studies, analysed some of the proposed reforms.

He acknowledged the universal credit as the “main extra ingredient” which distinguished the current government’s approach from that of Labour, identifying it as “a (mainly welcome) simplification of the complex system of out-of-work benefits”.

He added: “The big question, however, is whether this approach stands a chance of success, at a time when the labour market is still suffering from the impact of recession.

“Most forecasters believe that the next few years offer at best a prospect of jobless growth, with sluggish private sector hiring insufficient to mop up the jobs shed from the public sector as a result of the cuts.

“My view is that the reforms are largely necessary, but by no means sufficient. Further ‘activation’ of the unemployed and (some of) the ‘economically inactive’ by making benefit receipt conditional on looking actively for work, and giving them some intensive help and support in looking for work (through the new Work Programme), is clearly a good idea.

“Or at least it is, as long as the assessment of who, among those who are genuinely ill or disabled, is really ‘fit for work’ is done fairly and sensitively.”

He acknowledged that the main challenge is the lack of demand in the labour market.

“It’s true that this approach may reduce the numbers on benefits and the benefits bill, but unless there is an increase in the number of jobs for them to go to, many may end up not in work but in other forms of poverty and social exclusion or, indeed, criminal activity.”

He concluded: “There are two missing ingredients in all of this, one short-term and one medium-term. The first is the lack of any kind of interim stimulus to labour demand for these groups: in this light, it was probably a mistake to ditch the Future Jobs Fund and other temporary ‘make-work’ schemes established in the dying days of the Labour government.”

“The second, as the CBI and other business leaders have been highlighting, is the lack of any real underlying strategy to promote growth (particularly employment-rich growth in the depressed regions of the UK): tinkering with employment legislation and other unfashionable ‘regulation’ will not make the difference here.”

By Millie Schurch

[Image courtesy of Steve Punter]