Major housing benefit climbdown as welfare reform unveiled

The universal credit is the brainchild of Iain Duncan Smith
The universal credit is the brainchild of Iain Duncan Smith

By Ian Dunt

The government has backtracked on plans to cut housing benefit as it unveiled the biggest shake-up of welfare for a generation.

The welfare reform bill, published today, does not include much-publicised plans to cut housing benefit by ten per cent if a claimant has been on jobseekers' allowance for over a year.

"We won't see this in the bill for one very good reason," work and pensions secretary Iain Duncan Smith told the Today programme.


"The more we looked at this, the more I reviewed the interplay between that reduction at 12 months and the universal credit and work programme meant that all of these people were going to move into the work programme anyway, so they would be having intensive help to get back to work."

But the former Tory leader discounted reports that the U-turn was the product of lobbying from deputy prime minister Nick Clegg.

"I am fully one with Nick and others on this," he said.

The U-turn comes on the same day that the government appeared to think twice about its proposed forestry sell-off, following a highly successful lobbying campaign from members of the public.

Shadow work and pensions secretary Liam Byrne said: "Labour has consistently called on the Tory-led government to abandon this change so we welcome their U-turn.

"They need a Plan B for the economy and a bigger welfare to work programme. At the moment they have neither."

David Cameron told an audience in east London that the reforms are intended to adapt welfare for the less-respectable work habits of a new generation.

"When the welfare system was born, there was what we might call a collective culture of responsibility," he said.

"More than today, people's self-image was not just about their personal status or success, it was measured out by what sort of citizen they were; whether they did the decent thing.

"Now let's be honest about where we've travelled to, from there to here. That collective culture of responsibility - taken for granted sixty years ago - has in many ways been lost."

The welfare plans would see the plethora of welfare payments simplified into a single universal credit.

The proposals are at least partly intended to improve the incentives to work for people on welfare, but experts are wary of the details.

Some researchers suggest the credit might reduce the incentive to work longer hours or for promotion because the taper level is too high.

There are also worries that by only agreeing to pay 70% of childcare costs, the government will leave some struggling families worse off than they are already.

Changes to the eligibility rules mean that couples need to work 24 hours a week between them with one partner working at least 16 hours if they are to receive the working tax credit.

Campaigners warn that the reform could leave some families worse off in work than out and might push them into poverty.

"The jury is still out on the universal credit," said Child Poverty Action Group chief executive Alison Garnham.

"The Treasury is wrecking the plans from the outset by enforcing funding shortfalls that will make work pay less for millions of people, scrap access to back to work support for hundreds of thousands of claimants, and slash the childcare funding that helps many parents work."

Mr Duncan Smith insisted that a million people would be better off under the reform.

"Nobody will be worse off because every single person, as we migrate them on to this new credit, will be cash-protected. That means that whatever system you are on, we will stay at that level whilst the new system is set," he said.

"The key thing about the system is that by bringing [benefits] together, simplifying them and making sure that people understand it, and by changing the way they're withdrawn so there's a simplified system - actually what we're going to see is just under one million people will be lifted out of poverty because of this, and one million people, mostly of the poorest, will see increases of around £25 per week as they go back to work."

Labour is generally supportive of the universal credit and is expected to support the main thrust of the bill.

"We'll support the government where it builds on our big reforms to sort out sickness benefits and get people who can work into work," Mr Byrne added.

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