Coalition government sets out radical welfare reform

[ElenorRigby]

Britain's welfare system is "bust", with such penal disincentives to work that many people on benefits regard those who take up job offers as "bloody morons"
Strange days...

I really don't see how the Govt are going to be able to make it preferable to being in work than being on benefits for many people.

The total 'value' of all the HB, CTC, JSA/IS, free NHS costs, possibly free school meals etc must be hugely greater than the lowest paid minimum wage job.

So how do they take that first step and make it happen?

How about this

The minimum wage is currently £5.93 per hour.

A 40 hour week therefore earns £237.20 a week or £948 per month. That's not a living wage without Govt top ups such as HB, Tax credits,etc

So wages are kept low - this subsidises employers and the tax-payer picks up the tab.

Double the minimum wage.

A wage of £474.40 a week or £1896 would be a living wage - especially if you add in universal benfits such as CB and have a £10K lower threshold for income tax.

The Govt then subsidises employers directly for having to pay these higher wages.

Same net difference but

The former benefit claimant now

has a job -

has choices about how spend their living wage

a whole raft of administration of benefits is removed

Meanwhile the govt

saves on HB as the cost of rents would reduce as people shop around to get better value for their money

You would also have to cap total benfit entitlement at a rate below the enhanced minmum wage to make work worthwile - that's the difficult part.

We would not need tax credits so much if we just stopped taxing people at the bottom end of the pay scale.

It seems insane to me that the Govt sets a minimum wage and the proceeds to tax it and then hand thattax back as a tax credit.

Glad to see the tax free allowance will go up to £10k and we need to keep raising it so more and more people pay no tax of NI at all.

double the minimum wage,and how many small businesses would be able to cope in this climate??

Thanks Minthumbag for pointing out the flaw in my approach. It would lead to wage inflation of those already in work.

Could it be done by some sort of sliding scale?

I'm quite keen to try to think about how the Govt does actually make work pay.

What Wonderstuff said.

Just been reading Ian Duncan Smith's speech on welfare reform.

'The former Tory leader highlighted the fact that people were better off claiming dole rather than working in a job paying £15,000 a year or less, risking trapping them and their families in poverty for years. '

By my reckoning you would need to set the minimum wage at £7.14 ph for a 40 hr week to produce an income of £15K per year.

When you look at it that way there is no incentive whatsoever to get a minimum /low paid job.

I can't really see any way round this problem than by raising the min wage

benefits are already low....breadline low....how much lower?

I dunno I thought £64.50 a week, or £110 a week for a couple was pretty meagre for living expenses, fair enough the rent and council tax is paid, but you still have to pay your gas, electric, water, feed yourself, clothes yourself.

It's hardly the life of o'riley

But if benefits total packages inc HB exceed £15,000 a year - which for most families it will then as Mint and Tocca say - benfits either have to go down or wages have to go up. there must be a differntial between working and not working to make working attractive.

I can't see benefits going down - frozen maybe but that's all.

I could see the monies that are currently paid in benefits as subsidies for low wages being transferred to raise wages - but the differential problem is then transferred to penalising those already on low wages.

Perhaps this is a West Lothian question?

I'm on benefits now (incase you hadn't already guessed )

while it wouldn't be comfortable (and lets face it the next few months/years aren't going to be comfortable for anyone really) I could accept my benefits being frozen, cut no - I'm not sure what I would do if they were cut and I have to face inflation/increased VAT. But having them frozen is a price I would be prepared to pay to help getting us out of this god awful mess we're in

One of the recommendations of the thinktank that IDS had produce a report seems to be getting rid of the 16 hour threshold, below which people lose benefits but get no extra help to compensate in the form of WTC. That has always been one of the biggest problems with the whole tax credit system IMO as it stops people being able to take the first steps into work.

Why do they not just ensure the system works so that benefits are removed on a sliding scale as earnings increase, instead of the all or nothing situation we have now with some of them. Surely that would solve the problem?

that would be a massive help definitely gaelicsheep. At the moment you can earn up to £20 a week without losing any of it, after that it's deducted £ for £ from your IS.

I have lost count of the number of jobs that are under 16hrs a week, but which would be perfect stepping stones for my hoped for career path that I've just had to gloss over as I know that I simply couldn't afford to do them.

The other issue is Housing Benefit and tax credits being able to come back years later and demand tens of thousands of pounds in overpayment that was the result of their errors.

This doesn't usually happen to people on full benefits.

It happens to the working poor, even if their income doesn't change over time.

It frightens a good many, as it can leave a working poor family in tens of thousands of pounds of debt, literally, that they cannot afford to pay.

Then, what little WTC and HB they get it cut off entirely, leaving them below the poverty line.

Working away.

This needs to be stopped.

The council and the government should have a max of one year to catch out errors and claim them back.

Or eat the cost.

And if the error is their own, they should eat the cost.

If overpayment was as a result of ther error then you can appeal their request for repayment. I did and the overpayment was written off.

That's why I was surprised to see on that episode of How the Other half Lives that the claimant meekly paid up when the council stated she's been overpaid.

A lot of people don't realise they can appeal, Wet.

And, during the appeals process, you still have to pay and have the benefit cut off.

We had this happen with working tax credits.

It was only after our MP got involved that it was cleared. But in the meantime, we were below poverty level, got into debt until DH found an evening/weekend job to fit round my day job.

Because they cut us off and the rent was £600/month (on a HA flat) alone.

That's why I think they should have a set amount of time to catch errors and then it's just their bad.

£15,000 is alot to get for doing nothing - can't believe the state gives out this much.
Stop benefits in cash would be a solution - vouchers for food & housing/bills payment system. Also identify the real poor from the can't be bothered.

Since I pay out for at least one family a year through tax - could I ask the govt to allocate me one - then I could ask them to do a few jobs for me around the house?

Seriously though - I do think the benefit system needs to be over hauled. Posted many times that when taking a job there should be a sliding support of benfits so you aren't any worse off. The culture of its never worth having a job cos benefits are higher needs to be broken - needs to be done with both carrot and stick approach. I would prefer to see more beenfits going to those that genuinely cannot work / are a carer for others as I beleive they save us the tax payers money.

Recently tried to employ a gardner / handy person who is on benefits - but guess what they didn't bother to turn up once agreed what they could be doing. Would rather just take the money handed out...

For God's sake. Benefits are shite in the UK. Loads of wages are shite. We've been in a race to the bottom for 30 years and all people want to do is starve the poor.

All the people who say they want to cut benefits are just reverse-claimants themselves. They want handouts from the state in the form of lower taxation, you are just another bunch of scroungers. Just get on with your own lives and stop fantasising about the idle poor and how you'd like to make them beg on their knees for crumbs.

Just understand, there will always be 5pc of the workforce unemployed under the prevailing political ideology. No single right wing economist - Tory, Labour or LibDem included - can stomach anything less. Full employment will never happen again. At the moment we have a huge recession and it will get worse. Where are people supposed to get jobs from, Mars?