Benefit reforms target work-shy

The Prime Minister said the Government would act to simplify the system, strip benefits from people who repeatedly turned down job offers and ensure individuals were only classified as disabled if they genuinely could not work.

The proposals include replacing nearly all existing benefits with a universal credit designed to ensure people are always better off when they are employed and will close the loophole where some couples receive more living apart.

Those who refuse to take up job offers face losing their handouts for up to three years, and there will be tougher sanctions for fraud.

Announcing the shake-up Mr Cameron said: “Never again will work be the wrong financial choice. Never again will we waste opportunity.

“We’re finally going to make work pay – especially for the poorest people in society.”

Mr Cameron said the reforms would slash £5.5bn from the welfare bill in real terms over the next four years by limiting housing benefit, reforming tax credits and taking child benefit away from higher-rate taxpayers.

But he insisted that the Bill was “not an exercise in accounting – it’s about changing our culture”.

Unions accused the Government of punishing people who could not find jobs, while charities warned that society’s most vulnerable would be hardest hit.

Questions were also raised about claims that nobody would be worse off “in cash terms” due to the reforms. The Institute for Fiscal Studies (IFS) has previously estimated that 1.4 million working-age families will lose out – although the research ignored transitional arrangements.

Speaking in east London alongside Work and Pensions Secretary Iain Duncan Smith, who has masterminded the reforms, the Prime Minister said: “I passionately believe that the welfare system should be there to support the needy and most vulnerable in our society and provide security and dignity for those in old age.

“That’s why the system was born, that’s what it’s always done – and with me, that’s the way it will always stay.

“But that doesn’t mean the welfare system shouldn’t change. It has to change because it just isn’t working.”

Mr Cameron said the £90bn annual welfare bill accounted for one in every £7 spent by the Government and was “simply not sustainable” and said the complexities within the existing system had “insidiously drained hope away from swathes of our society”.

He said the Universal Credit would ensure those coming off welfare or increasing hours could keep 35p of benefits for every extra £1 they took home, benefiting an estimated 1.5 million low earners.

Housing Benefit will be restricted to cover only the cheapest 30 per cent of homes in an area and there will be limits on the amount which can be claimed by families of a particular size.

Unemployed people who refuse to take a reasonable offer of a job or voluntary work will lose benefits for three months on the first occasion, rising to three years if it happens three times.

Social enterprises, charities and businesses will run back-to-work programmes on a payment-by-results system and those assessed to be capable of work will be offered training, help and support and will lose benefits if they turn it down.

But those whose disabilities make work impossible “will be supported. Full stop, end of story”, promised the PM.

TUC general secretary Brendan Barber said it would “ring hollow” with low income families.