Work and Pensions Secretary Iain Duncan Smith set out plans today to revolutionise the existing benefits system.

Set out in a discussion document 21st Century Welfare are a series of options which focus on ensuring work always pays and is clearly seen to pay. They include allowing people to keep more of what they earn as they move into work whilst withdrawing benefits at a single, more reasonable rate as people start to earn more money.

Launching the paper, Iain Duncan Smith said:

“A system developed to help the most vulnerable and support people in times of need is trapping people in a cycle of dependency. We now have children growing up in households where neither parent works and where the only future is one stuck on benefits. This is a tragedy that we must bring to an end.

“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.

“This will affect everybody which is why I want everyone with a view on the way forward to contribute. I believe these changes will make work pay and end the poverty of aspiration that has trapped too many people for generations.”

The options in the document could see a major reform of the number and type of Tax Credits and benefits available and the way in which they are withdrawn when people move and progress in the workplace. They would:

• Combine elements of the current income-related benefits and Tax Credit systems;
• Bring out-of-work and in-work support together in a far simpler system.
• Supplement monthly household earnings through credit payments reflecting circumstances (including children, housing and disability).