Chapter 6 Conclusion

1. The previous chapters outlined the kind of approach we are considering to address the failings of the current benefits system. These ideas are underpinned by the key aims outlined in chapter 1 of a system which improves work incentives, is fair, protects those most in need and is simpler.

2. Reforms could:

• improve work incentives by reforming the way in which benefits are tapered as incomes rise and allow people to keep more of their earnings;
• be fair and targeted to those most in need through tapers which focus payments on those on the lowest incomes, while maintaining levels of support for those out of work; and
• provide simpler support paid to those in or out of work, by simplifying the complex array of overlapping in- and out-of-work means-tested benefits and Tax Credits.

3. Such changes could enable the Government to reduce worklessness, reduce error and fraud and contain welfare costs without increasing costs to business.

4. These ideas recognise that the rapid withdrawal of benefits and Tax Credits currently provide little incentive for many to enter work, particularly on low pay. Too often, there is little financial reward for greater effort. Benefits, Tax Credits and other support are withdrawn quickly at the same time as liability to Income Tax and National Insurance contributions increase.

5. A single withdrawal rate would make work pay by reducing Participation Tax Rates and Marginal Deduction Rates associated with a move into a job or increased hours of work. It would make gains to work much clearer to see, remove complex transitions between benefits and Tax Credits and would encourage more people to move into work.

6. Our ideas would contain spending on welfare more widely by focusing support to those most in need, building on announcements recently made to target support for Child Tax Credit and Housing Benefit on those with the lowest incomes. A reformed system would be based on the same structure of entitlement for people who are not working as now, including help with housing costs and extra support for families, disabled people and carers.

7. Such a system would reflect a balance between supporting those most in need and rewarding work and responsibility. We will help people to find work, and these reforms will make sure it pays when they do so. They in return will be expected to seek work and take work when it is available.

8. An impact assessment, including an equality impact assessment, will be produced as part of the policy development process for any proposals that follow.

9. By actively putting work at the centre of working-age support we want to create a new contract with the British people. This contract is about a responsible society working together to improve the quality of life for those who are worst off.

10. We would welcome views on the best way forward and in particular on the questions posed throughout this discussion document and repeated in chapter 7.

This consultation is now closed.