Coalition to unveil working solution for benefits shake-up

The introduction of the Universal Credit will be branded the biggest shake-up of the welfare state since its creation as Ministers pledge to ditch the current "complex, bureaucratic and inefficient patchwork of benefits" and make work pay.

Two and a half million people will be better off under the measures, according to the coalition, and the number of jobless households will be slashed by 300,000 by tearing up a system under which people can be better off living on benefits than being in work.

Benefit claimants will also have to agree to abide by a contract which will set out what is expected of them in return for support from the state. The Universal Credit will be available to those in work as well as unemployed people and will be tapered so it is always better to be in work.

Speaking in Parliament on Tuesday, Mr Duncan Smith said: "We are in touching distance of a Welfare Reform Bill which will reform our system for a generation as we improve work incentives, secure fairness and protect the vulnerable, as we introduce a comprehensive Work Programme, build a Universal Credit system to ensure work pays and get welfare spending under control to regain economic credibility and stability."

Mr Duncan Smith will unveil a White Paper setting out detail of the new Credit and the claimant contract.

One source familiar with the paper said: "There are millions of families trapped in cycles of dependency by a system which fails to make work pay.

"This paper will finally tackle that problem and create a welfare system fit for the 21st century."