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U.K. Government Plans Overhaul of Benefits System
By
Alistair MacDonald, The Wall Street Journal
May 27, 2010
United
Kingdom
A senior official in Britain's new coalition government will promise "radical reform" of the country's welfare system on Thursday, the Department for Work and Pensions said.
Countries throughout Europe are looking at cutting generous welfare provisions as they tackle large budget deficits. The U.K. government also wants to reform a welfare system it says entraps people in poverty.
"A system that was originally designed to help support the poorest in society is now trapping them in the very condition it was supposed to alleviate," Secretary of State for Work and Pensions Iain Duncan Smith is scheduled to say Thursday, according to excerpts from a speech.
Mr. Duncan Smith says a "root and branch reform" is needed that tackles extreme poverty and a welfare system "where some of the poorest face huge penalties for trying to get off benefits and into work." He argues that some work is so low-paid and welfare benefits so comprehensive that people have no motivation to enter work.
"For many people, the move from welfare into work means they face losing more than 95 pence for every additional £1 [$1.44] they earn," he will say. "One of the biggest problems is that for too many people work simply does not pay."
The U.K. Treasury estimates that spending on benefits—which include everything from unemployment compensation and worker disability to government retirement benefits—will total around £200 billion ($288 billion) in the 2010-2011 financial year, about 14% of the country's gross domestic product. The Department for Work and Pensions estimates that 1.4 million people in the U.K. have been on an out-of-work benefit for nine or more of the last 10 years.
Mr. Duncan Smith is chairman of the Centre for Social Justice, a think tank that argues the provision of benefits entrenches poverty by making people dependent on it and suggests that people should be moved gradually off benefits when they get a job.
The government is also forming a new cabinet-level committee, headed by Mr. Duncan Smith, with cabinet colleagues from across the government, including the Treasury, Home Office, Health and Communities and Local Government departments, to tackle the underlying causes of deep-rooted poverty in Britain.
Mr. Duncan Smith says extreme poverty is a problem in the U.K., where income inequality is at its highest level since comparable statistics began in 1961.
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