Britain announces "revolutionary" reforms to welfare system

10:30, October 05, 2010      

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A senior Conservative Party official in the British coalition government on Monday announced radical reforms to the welfare system, but the extended timetable puts a question mark over whether they will be fully introduced.

The headline changes announced in the run-up to the Conservative party conference on Saturday were joined by a further set of announcements on Monday that will see a complex set of different benefits being united into one, and it is the scale of the reform which could put its completion in some doubt.

The first changes are scheduled to take place by 2013, but the system will not be fully overhauled for eight to ten years. A general election is scheduled for 2015, and the completion of the reform might be in doubt if the opposition Labor party won the election.

Welfare benefits cost nearly 200 billion pounds (about 300 billion U.S. dollars) a year out of a government spending budget of about 700 billion pounds (1.05 trillion dollars). There are several types -- jobseekers' allowance, income support, housing benefit, tax credits, municipal tax benefits, and disability allowance.

All the benefits and allowances are currently administered separately, with some being run by local government, and benefits are withdrawn at different rates.

The bill for fraud and error in payments is 5 billion pounds ( about 7.5 billion dollars) a year, and administration costs a further 4 billion pounds (about 6 billion dollars). Both bills would be reduced under the reform.


The government also wants to tackle the so-called "poverty trap " -- which sees people earning more in benefit than when working.

For those coming off benefit and into work, the loss of benefits matched with the gain in wages can mean that workers are losing between 80 and 90 percent of the extra money they get for working, and it is a powerful disincentive that stops some from taking a job.

Prime Minister David Cameron said on Sunday the new welfare credit would mean that "it will be worth it for everyone to work, wherever they are in the income scale, whatever benefits they receive. It is truly revolutionary."

His finance minister, Chancellor of the Exchequer George Osborne, added further details to the reforms on Monday.

He revealed that one of the cornerstones of the welfare state, which has been in place since just after the Second World War, would be radically altered.

Osborne said that child benefit, which is paid for every child under 18 to their mothers, would no longer be universal.

A household with a parent earning more than 44,000 pounds a year (about 66,000 dollars) would see the benefit taken back through the tax system. Child benefit is 1,000 pounds (1,500 dollars) a year for the first child, and about 700 pound each for any others.

It will affect 1.2 million families, and is likely to prove deeply unpopular among the well-off voters who will be hit by the cut. Many of them traditionally vote Conservative. It will save about 1 billion pounds (1.5 billion dollars).

Osborne also announced at the Conservative conference in the English midlands city of Birmingham a headline-grabbing initiative to limit the amount of benefit paid to a maximum ceiling of 26,000 pounds (about 39,000 dollars) per family. He did not say how much money would be saved, but it's likely to be quite small in government terms.


Osborne said of the benefit changes that they heralded "a radical new welfare state where it always pays to work, where effort is always rewarded and where fraud can no longer hide behind complexity."

Welfare and Pensions Secretary Iain Duncan Smith defended the changes in welfare, which he will steer into being. He defended the reduction in child benefit as part of the larger government plan to cut the record public spending deficit of 153 billion pounds (about 240 billion dollars) by 111 billion pounds.

He said in a BBC interview: "I think it is fair, as fair as it can be when you have to start reducing expenditure. The result does not fall on the poorest."

He added: "This is really the last bastion of a welfare system that no longer functions -- that doesn't make a lot of sense."

Alison Garnham, chief executive of the Child Poverty Action Group, said: "This is not the right thing to do; this is the wrong thing to do. This is a new child penalty."

"Once again families with children are being expected to bear the brunt of the cuts. This is taking money directly from children and, once again, from their mothers, who are the main recipients of this benefit. It's shortsighted and counterproductive to ignore the role this benefit plays in family finances," said Garnham.

Source: Xinhua


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