Tax credits could be scrapped in benefits and welfare shake-up

The idea is one of a number of options outlined in the Department of Work and Pensions consultation paper, 21st Century Welfare, designed to revolutionise the existing benefits system.

The options include:

•    combining elements of the current income-related benefits and tax credit systems
•    bringing out-of-work and in-work benefits into a single ‘universal credit’
•    supplementing monthly household earnings through credit payments reflecting circumstances, such as children, housing and disability.

The new system would aim to be simpler and to reduce fraud and error, as well as improving incentives to get a job, as benefits would be based on a person's earnings rather than the number of hours they worked.

The consultation paper says that the plan includes introducing ‘an integrated IT system to manage all claims, and a single payment system to apply a withdrawal rate and pay the correct entitlement. These would not be entirely new systems and could be built on our existing IT and capabilities.’

Purnima Tanuku, Chief Executive of National Day Nurseries Association (NDNA) said, ‘NDNA welcomes any measures which will help remove any instances of ‘benefit traps’ and make work pay for families. This is also a valuable opportunity to review how the costs of childcare are supported, which is vital in making work pay and childcare more affordable.’

‘Using an electronic or voucher payment, which could be used only with registered childcare, would help families manage their money, and this still could be made as part of a future benefit system.  This would also be useful in supporting families as benefits ‘taper off’ under the proposals.’

Speaking at the Bromley by Bow community centre in east London, Mr Duncan Smith (pictured), said, ‘We are proposing to change forever how the system works. Not tinkering around the edges, but a fundamental change from the top to bottom, making it easier to help people into work, fairer to those who pay for the welfare state and continuing to provide unconditional support to those who need it.’

The Work and Pensions Secretary also called on members of the public to contribute to bringing down the budget deficit by making suggestions on the Government’s Spending Challenge website (News, 30 June).

Jackie Howse, owner of Little Robins Day Nursery in Hall Green, Birmingham said, ‘It is interesting to hear the proposals that the government is making to reduce fraud and simplify the payment of benefits. However there is still no mention of the childcare element being paid directly to providers to help small businesses’ sustainability. The government are still not recognising or listening to providers who are telling them that a substantial number of parents are not paying the childcare element to providers and committing fraud.’

‘It’s imperative that all providers take this opportunity to write to their local MP, start a petition or make the suggestion on the Spending Challenge website that providers be paid tax credits directly.’