Universal Credit will make work pay for some of the poorest people in Britain, the secretary of state for Work and Pensions Iain Duncan Smith announced today, as he set out details of the Government’s programme for Welfare Reform.

Launching the White Paper Universal Credit: Welfare That Works alongside deputy prime minister, Nick Clegg, Iain Duncan Smith set out how it will plans to remove the complexities of the current benefit system which at the moment means it pays to stay on benefits rather than go into work.

The new Credit will provide a basic amount with additions for those with children and other caring responsibilities, people with disabilities and those with housing needs.

It will be available for people both in and out of work and will replace the complicated patchwork of existing support including: Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowances.

The new Universal Credit will ensure that support is withdrawn slowly and rationally as people return to work and increase their working hours, meaning that they get to keep more of their earnings for themselves and their families regardless of how many hours they work.

In the long run the reforms are expected to lift 350,000 children and 500,000 adults out of poverty.

Launching the White Paper Iain Duncan Smith said: "With five million people trapped on out of work benefits and almost two million children growing up in homes where nobody works, we cannot afford to simply continue tinkering around the edges of the welfare system. Only root and branch reform will do.

"At its heart, the Universal Credit has a simple ambition – to make work pay, even for the poorest. This will finally make it easier for people to see they will be consistently and transparently better off for each hour they work and every pound they earn.

"It will cut a swathe through the massive complexity of the existing benefit system and make it less bureaucratic to run. And by utilising the best data technology available, we will streamline the system to reduce administration costs and minimise opportunities for fraud and error at the same time.

"This will change Britain for generations, and make sure we have a welfare system fit for the way we live and work today."

Speaking at the launch event in North London today, deputy prime minister, Nick Clegg added: "Today the Government is announcing the most radical overhaul of our welfare system since its inception, driven by a single, overriding principle: the purpose of welfare is to help people into work.

"Work is the surest route out of poverty; it structures lives; unlocks potential; builds confidence; forges friendships; cements communities; provides mental well-being.

"Across the country households will be better off. Not just better off because they’ve crossed a notional poverty line. Better off because they will have the chance of a better life for themselves, and a better life for their children. As the saying goes, a hand up, not a hand out."

There will be a new system of conditionality backed up by tougher sanctions for those who do not comply. Claimants will be split into four different groups depending on how close they are to getting back to work, and we will tailor the support they receive depending on which group they are in:

No conditionality – disabled people or those with a health condition that prevents them from working, lone parents or lead carer with a child under age one;

Keeping in touch with the labour market – lone parent or lead carer with a young child aged over one but under five;

Work preparation – disabled people or those with a health condition which prevents them from working at the current time;

Full conditionality – jobseekers

As part of a radical shake up of welfare ministers will introduce Mandatory Work Activity for some jobseekers, where advisers will have the power to refer customers to an up to four week full-time Mandatory Work Activity project.

Every participant will be expected to spend at least 30 hours a week, for up to four weeks, on their Work Activity placement and will be required to continue to look for work.

The reforms will also tackle the complexities of fraud and error, which under the current system is highly susceptible – costing the taxpayer around £5.2bn a year and accounting for 3% of total welfare spending.

The Government says complexity also makes the system inefficient – in 2009 2.3m contacts to the DWP were driven by people contacting the wrong agency.

The Universal Credit will help reduce the scope of that fraud and error significantly as it makes the whole system simpler and easier to understand.

Sector views: A ‘one size fits all’ approach cannot be applied

Joe Korner, director of communications at the Stroke Association, said: “Stroke is the leading cause of severe adult disability and leaves many with complex, long term problems. A ‘one size fits all’ approach cannot be applied to people with disabilities, and particularly stroke survivors who not only have physical issues but are also left with a whole host of emotional, cognitive and psychological difficulties to deal with.

"When someone has a stroke, their life and that of their family can be deeply affected. They will see a sudden and dramatic drop in income and a marked increase in expenditure.

"The Stroke Association is concerned that the proposed welfare reforms could have the unintended consequence of greater financial difficulty for those people who are disabled by stroke, leaving them dependent on their partners who, themselves, may have given up work in order to care and are now struggling to pay bills and meet the cost of care.

"These families are amongst the most vulnerable in society. It is vital that stroke survivors are properly supported to enable them to achieve their potential of recovery and, where possible, return to work.”

SCoWR: system simplification is fine but should not result in financial losers

The Scottish Campaign on Welfare Reform (SCoWR), a coalition of over 40 third sector organisations, faith groups, unions and charities from across Scotland, would in other circumstances welcome such proposals but warn that it seems that the Government intend to make work pay by impoverishing the jobless rather than improving the incomes of those on low incomes.

In response to the White Paper’s launch SCoWR spokesperson, Bill Scott, commented: “SCoWR agrees that the time is ripe for a simplification of the benefits system. At the moment the system is so complex, people often don’t claim what they are entitled to and are plunged into financial chaos when their circumstances change.

"We want to see the system simplified but only so long as that doesn’t result in financial losers. SCoWR welcomes the Government’s estimate that up to 2.5 million households will get higher entitlements as a result of the move to Universal Credit. But this should not be achieved at the cost of other poor households losing out.

"The Government are already engaged in slashing the benefits of those who, through no fault of their own, are jobless. One hundred thousand jobless home-owners on Mortgage Interest Relief have already had their support cut placing them at risk of defaulting and homelessness. Folk unemployed for a year will soon lose 10% of their Housing Benefit putting them in the same risk of homelessness.

"One in five of Scots disabled people on Disability Living Allowance are also going to have their benefit taken away from them by the imposition of an arbitrary test with a pre-determined outcome. Given the £18billion welfare cuts already announced these reforms risk being less about ‘making work pay’ and more about making the very poorest in our society pay for the economic mess created by the banks”.

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