Welfare could be localised and extra children shouldn't always mean more benefits (ConHome)

Seven Conservative MPs have teamed up with the Centre for Policy Studies and ConHome to propose ideas to turbo charge the UK economy. YesterdayKaren Bradley recommended a set of tax cuts. Today Harriett Baldwin outlines controversial reforms to welfare.

“Taxing those in work to pay out of work benefits that act as a disincentive to work is not helpful to growth.

The complexity of benefits is well known. It can take a Job Centre Plus advisor 45 minutes to calculate whether a claimant would be better off in work.  Often they are not.

The welfare system has a range of deterrents to work: in some cases, a single mother would be 4 pence better off for every additional £1 she earned. The welfare system incentivises a leap from 0 hours to 16 hours but no further.

An out of work housing benefit recipient has the comfort of knowing that the rent is going to be covered.  Once work starts, there would be a real fear of the risk of arrears if the move into work turned out to be unsuccessful.

Welfare Reform will start sweeping this away. It is estimated by the government that it will make 2.7 million households better off and lift 1 million people out of poverty, including 350,000 children. From 2013 onwards, all new claimants for JSA, Housing benefit, Child Tax Credit, Working Tax Credit, Income Support and ESA will receive a single Universal Credit. Each hour they work and each pound they earn will have a clear, direct link with additional net income.

The positive impact on child poverty is especially welcome. The previous Government’s approach to child poverty was to pay low income parents more whenever they have a child or additional children. Child Tax credits of £2,555 per child are paid to all households with incomes under £16,000. This is in addition to tax free child benefit and an entitlement to a larger home through the housing benefit subsidy.

Although I have never met an out of work teenager who chooses pregnancy, the availability of benefits linked to the number of children could be seen as an attractive incentive to a 16 year old, who might not otherwise have many ways of earning more than £3.64 an hour.  With one child and a range of child benefits, rent and council tax paid, a teenage girl can have a net household income of over £9,000 per annum.

At a time when we need to focus amore support and help on getting young people into work, the incentives to work at the point where a young woman leaves education are not strong enough.”

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Date Added: Friday 18th November 2011