The money-go-round: cutting the cost of welfare

Document type
Cawston, Thomas; Haldenby, Andrew; Nolan, Patrick
Date of publication
1 October 2010
Social Policy, Poverty Alleviation Welfare Benefits and Financial Inclusion
Social welfare
Material type

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This Reform report publishes new evidence to inform the debate on each of the Governments key welfare proposals: reducing spending on middle class welfare, making work pay and reforming the delivery of welfare (including introducing the Work Programme). According to Reform, the Government needs to:

  • Means-test the Child Benefit in a simple and fair way. Rather than basing means-testing of the Child Benefit on the presence of any earner in the household facing the 40p tax rate, the best way to means-test the Child Benefit would be to combine this support with the Child Tax Credit 
  • Remove more benefits from middle and higher income earners. This includes abolishing benefits such as the Winter Fuel Allowance. Undertaken properly these reforms will increase the fairness of the welfare system. The potential savings from these reforms (including changes to the Child Benefit but not to the core State Pension) is around 10 billion 
  • Not go ahead with plans to introduce a Universal Credit with more generous earnings disregards and a single uniform rate of abatement. There needs to be an honest debate on the trade-offs in the design of policies designed to make work pay and more cost effective opportunities for simplification should be employed.
  • Introduce a discovery phase for the Work Programme to allow the implementation of a form of contracts and market structure that would actually work. This will require a greater understanding of the risk profile of the population and the costs of getting different population groups back into work.

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