Select Committee on Work and Pensions Written Evidence


Memorandum submitted by Institute for Public Policy Research (IPPR)

SUMMARY

    —  Later in 2007 the Institute for Public Policy Research (IPPR) will be publishing work on welfare reform including creating a citizen-centred welfare state. The work will be completed in May but this submission signals some of the key issues that have emerged through our research.

    —  A radical overhaul of the current benefits framework is required if we are to achieve the Government's aspiration of an 80% employment rate and end child poverty (as well as poverty experienced by other people).

    —  It is desirable and entirely feasible to simplify out of work benefits for people of working age. This will require vision, political will and upfront resources.

    —  We recommend the detailed modelling of a single out of work benefit for people of working age, with a view to introducing it by 2020.

    —  New Zealand offers valuable lessons in how a single benefit might be structured and planned.

    —  The advantages of a single benefit include:

    —  greater transparency (leading to greater understanding of, and support for, the benefits system),

    —  greater administrative simplicity,

    —  the end of a system of categorising people according to a single characteristic such as lone parenthood and the introduction of a system centred on the citizen as an individual,

    —  greater alignment of the benefits systems with employment support options.

    —  A move to a Single Working Age Benefit would support more people into work and out of poverty and generate savings to the public purse in the medium to long term.

SUBMISSION

  1.  Later in 2007 IPPR will be publishing work on welfare reform including creating a citizen-centred welfare state. The work will be completed in May but this submission signals some of the key issues that have emerged so far through our research.

  2.  The core question that must be addressed is: what's wrong with the current system of benefits? We conclude that the current system fails to deliver on, what should be, its two primary objectives: to support people back into work, and to lift people out of poverty at times when they cannot work.

  3.  One of the reasons for this systemic failure is the complexity of the benefits system and its inability to respond effectively to individuals' needs and circumstances.

  4.  Much of the current complexity exists for good reason. In part, the current level of complexity exists because policymakers have sought to make the benefit system more responsive to people's varying circumstances and to counter unintended consequences of previous reforms.

  5.  However, there is now an opportunity, and a need, to do more than tweak the system. We should be developing a coherent vision for what kind of a benefits system we want and start to build a path to get there. It is entirely feasible to simplify the benefits system, if there is the political will to do so.

  6.  Based on our research, we strongly recommend that the Department for Work and Pensions undertakes (or commissions) detailed modelling work to explore the likely impacts of creating a single out of work benefit for people of working age. Such a benefit would combine Job Seekers Allowance, Incapacity Benefit/Employment Support Allowance and Income Support.

  7.  David Freud highlighted certain advantages of a single benefit (2007: 101) in his review but there are many more. These include:

    —  greater transparency leading to greater understanding of and support for the benefits system,

    —  greater administrative simplicity,

    —  the end of a system of categorising people according to a single characteristic such as lone parenthood and the introduction of a system centred on the citizen as an individual,

    —  greater alignment of the benefits systems with employment support options.

  8.  David Freud's Review also suggested that a single benefit, set at a single rate would be "very expensive" and may have adverse impacts on work incentives. This would only hold true if the core benefit was set at a level that is considerably higher than the current rate of Job Seekers Allowance. It would be possible to set the rate at a level that did not adversely affect work incentives (ie not considerably higher than JSA) by simultaneously making improvements to child and disability contingent measures such as tax credits and Disability Living Allowances.

  9.  In many respects the UK is an international leader in welfare reform. There are, nonetheless, lessons that can be learned from a small number of countries. The government of New Zealand has declared its intention to reform its system of out of work benefits so that there is a core working age benefit (see Economic Survey of New Zealand, OECD, 2005).

  10.  We would be happy to provide oral evidence to the Committee, when we are likely to have completed our study and be in a position to provide more details of our rationale, analysis and proposals for benefits simplification.

3 April 2007





 
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