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Reform of welfare benefits

Comment 2nd July 2010

I will apologise in advance if this is a little incoherent, it's 4 am (but the site is now working properly – yay).

There is much duplication within the benefits system, if the government is serious about drastically reducing the welfare bill they could do worse than abolish the current convulted system of interlocking benefits, each of which affect oneanother and replace with a simple '2-tier' system – one for the employed and another for the unemployed.

Under the current system, a family can be in receipt of several different benefits as a result of their income and exact familiar situation.  If one benefit changes, up or down, it has a knock on effect to most, if not all, of the other benefits received.  For each £1 extra, for example, received in tax credits, housing benefit and council tax benefit will be recalculated and reduced by a similar amount.

Example: A working father, housewife, one child, renting privately under the current system

Earnings – £18000 p.a. gross – tax and NI deducted at source circa £3,600 (above average earnings for this area)

Tax Credits & other benefits received circa £8000 p.a. (*calculated from entitledto.co.uk website).  Requiring separate application and processing for each benefit.

Raise the tax threshold and introduce a 'one stop shop'  to avoid the unnecessary duplication saving money on both staffing and administration, simplifies the overall process, reduces the chances of an error and reduces the total benefits bill.

Taking my theoretical family from above;

1. Increase in Personal Allowance to £10,000 p.a. decreases tax & ni liability to £2,900 (using current NI thresholds) giving a net income of £15,100.

2. Under current regulation, the above calculation indicates this family 'requires' a gross income of £22,000.

Upon providing evidence of eligible rent, child's d.o.b. to the one stop shop ONE calculation could be performed with an annual payment of £6,900 due – a direct saving of £1,100 on their current benefits bill with further savings as mentioned above. 

If administered by HMRC, or an offshoot thereof, centrally, they'll already know your income and knowing which benefit elements you would be entitled to, should result in a fast and efficient service.

 

A similar approach would apply for the 'unemployed' benefit side – provide evidence of eligible rent, children, any income, etc to the one stop shop for a single benefit payment made up of the required elements (i.e. JSA, HB, CTB) with similar cost saving benefits from reduced administration.  Eligibility to benefits as an unemployed person or couple is a matter already addressed in several other suggestions.

Why does this matter?

Simplification of the benefits system with reduction in paperwork and significant cost savings.

What sense does it make to take monies in taxation only to give it back in the form of tax credits/benefits – this incurs a needless administration cost for each and every worker!

Replace the current benefit system with a 'one stop shop' and you instantly remove the necessity for complex calculations and recalculations upon the smallest change (which themselves often lead to errors which the recipient is held liable for, even when it's the council's / government's error), reduce the required number of staff for processing, reduce requirements on housing said staff and expedite support for those who most need it (whilst paying less in benefits overall).


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