Welfare revolution: Benefits system to be simplified in attempt to make work pay

Tax credits have already been scaled back for the middle classes but today Work and Pensions Secretary Iain Duncan Smith will signal more radical reform.

Merging in-work benefits such as tax credits – which have helped

millions of families but have been criticised for being overly complicated – with out-of-work benefits such as Jobseeker's Allowance is one of the options he will unveil for a shake-up designed to make things simpler.

The reforms are aimed at making sure people are better off financially if they are in work amid concern some people are put off finding work because they could end up worse off under the existing system.

In a speech in East London, Mr Duncan Smith is expected to say: "After years of piecemeal reform the current welfare system is complex and unfair. For many people taking a job leaves them no better off than a life on benefits, and this has trapped significant parts of our society in inter generational worklessness and entrenched poverty.

"The complexity of the system also creates risk and uncertainty for the people in society who most need stability. We want to simplify the system to make it clear that work will always pay. Our reforms should also ensure the system is easier for individuals to understand and will reduce the high costs of fraud and error."

A Command Paper published by Mr Duncan Smith today will list other options including giving those on low incomes monthly top-ups according to their circumstances when they find work, as well as looking at how to make the system more automated and cut fraud.

Nearly 20 per cent of the working age population are on out-of-work benefits in some parts of the region such as Hull, and both coalition partners have made clear their determination to reform the welfare system. Nationally five million people are on out of work benefits, 1.4 million of them being on benefits for nine or more of the last 10 years.

Chancellor George Osborne announced benefit cuts in the Budget last month.