Tory welfare revolution begins at east London social enterprise

A radical shake up of the welfare system, which will see vulnerable people keeping some of their benefits when they find work, was revealed today at an east London social enterprise.

Work and pensions secretary Iain Duncan Smith set out his plans to revolutionise the existing benefits system, including tax credits, in a new ‘command paper’ called 21st Century Welfare.

He said it was the most radical overhaul of the system in a century, ensuring that work always pays.

The plans include allowing people to keep more of what they earn and withdrawing benefits at a ‘more reasonable rate’ when they start work.

It is something the social enterprise sector, especially social firms, have been campaigning for for years, while stressing that there should be support in place for the most vulnerable such as the long-term unemployed, former offenders and people with disabilities.

Launching the paper at the Bromley by Bow Centre in east London, which provides health and community services, Duncan Smith urged people to have their say in the consultation.

 ‘A system developed to help the most vulnerable and support people in times of need is trapping people in a cycle of dependency,’ he said.

‘We are proposing to change forever how the system works. Not tinkering around the edges but a fundamental change from the top to bottom. Making it easier to help people into work, fairer to those who pay for the welfare state and continuing to provide unconditional support to those who need it.

‘This will affect everybody which is why I want everyone with a view on the way forward to contribute. I believe these changes will make work pay and end the poverty of aspiration that has trapped too many people for generations.’

The proposals include:

- Combining elements of the current income-related benefits and Tax Credit systems

- Bringing out-of-work and in-work support together in a far simpler system

- Supplementing monthly household earnings through credit payments reflecting circumstances (including children, housing and disability)

The changes are being made to incentivise people back into work as there would be either no reduction in the benefit they earned or a taper applied to reduce benefit, which would apply to earnings rather than number of hours worked.

The changes have been cautiously welcomed by those operating in the social enterprise sector.

However, Unite, the UK’s largest union, condemned the government for announcing the plans to help people into work while also scrapping the Future Jobs Fund, a £1bn fund set up by the last government to help people into employment.

Unite was also concerned that the changes would impact the most vulnerable.

Unite Assistant General Secretary for Public Services Gail Cartmail said: ‘For the government to afford to do this will inevitably mean that other benefits not directly related to the unemployed will have to be cut.

‘Add to that the encouragement for people to work longer and you have a cocktail of measures which do not mix well and leave a sour taste in the mouths of the most vulnerable.’