Iain Duncan Smith proposes overhaul of the benefits system to get 600,000 people into work

Iain Duncan Smith's Centre for Social Justice is today publishing proposals which are described in one paper as representing what would be "biggest overhaul of the welfare system for 60 years".

In essence IDS is proposing to simply the benefits system - moving from 51 complicated benefits to just 2.  Although there would be an initial subsidy of in-work income the Conservatives believe that 600,000 more people could enter work and society and the taxpayer would soon gain.

Edward Heathcoat-Amory handily summarises the report's aims and proposals in the Daily Mail:

"THE PROBLEM
There are 5.9million working-age people claiming out- of-work benefits, costing £74.4billion a year in welfare payments. Our current benefit system has three main problems. First, because people lose benefits when they earn more money - for some, as much as 90p in every new pound earned goes back to the state - there isn't much point in them getting a job. Second, the system penalises two-parent families - the so-called couple penalty. Third, the system is incredibly complex, with 51 different benefits on which the Department of Work and Pensions currently issues 8,690 pages of guidance. So we have a welfare state which is not only massively expensive, but fails to help the really needy, and actively discourages both work and stable two-parent families.

THE PROPOSAL
First, to allow low earners to make more money before they lose benefits, so encouraging more to enter the jobs market. Second, to move from 51 benefits to only two - a universal work credit, and a universal life credit. One of these would be paid to those out of work or on low incomes, and the second to meet the cost of additional living expenses for those on low incomes. For those in work, these two payments would arrive in the pay packet through the Pay As You Earn (PAYE) system.

THE COSTS - AND BENEFITS
The system the Centre for Social Justice favours would cost £3.6billion a year up front. It claims the state would make this back, as recipients would pay £800million more in tax, there would be £2billion saved on administrative costs, £622million saved on crime, and £670million saved on health.

WINNERS AND LOSERS
Benefiting would be 1.6million households where one person works, 750,000 lone parents, and 1.8million working couples. The main losers would be medium earners, who would lose their child tax credit. Overall, incomes of 4.9million low-earning households would rise by between £800 and £1,000."

Jonathan Isaby