Smith tightens the nation's belt

The government this week pressed ahead with plans for widespread benefits means testing and payment increases linked to inflation, despite widespread criticism that many vulnerable groups would miss out.

Pensions and disability benefits changes took centre stage, but the spotlight also rested very firmly on maternity and paternity leave (explained in detail below), which have undergone their most radical overhaul in a generation. The new system could go some way toward easing the substantial financial burden faced by many new parents.

Secretary of state for work and pensions Andrew Smith told parliament most benefits would rise in line with the current inflation figure of 1.7%.

As part of a pensions package, single pensioners will see their basic pension rise by £100 a year, equal to £8.33 a month, from next April. Couples will be given a £160 rise, an increase of £13.33 per month. The basic state pension is therefore going up by 2.58%, giving a single pensioner a weekly income of £77.45 while a couple will be on £123.80.

The government also said benefits for the poorest pensioners without a private or company pension would rise. It confirmed that the so-called minimum income guarantee (MIG) will pay £102.10 a week for a single person and £155.80 for a couple.

However, no sooner had the an nouncements been made when the National Audit Office pointed the finger at the department of work and pensions for failing to encourage pensioners to claim all the benefits to which they are entitled.

In a damning report, the NAO revealed that tens of thousands of pensioners are missing out on up to £1,000 a year.

The government was also accused of confusing pensioners by continually changing the names of benefits, the latest of which will see MIG be replaced by the pension credit. According to the NAO, 76% of the pensioners receiving MIG said they had never heard of it. The department of work and pensions said getting customers to claim cash was a key priority. Mr Smith said: "These increases will provide support for those who need it most. They are also making sure that we tackle pensioner poverty."

Age Concern disagreed, arguing that research showed a significant rise in the basic pension was needed. It said the majority of pensioners failed to reach a decent standard of living. Worst hit were local authority residents who must continue paying rent into retirement. The report, Modest but Adequate, revealed that a single tenant needs to save enough to provide £142 a week on top of the state pension for a reasonable retirement.

This week also saw significant changes to incapacity benefit. Hun dreds of thousands of people currently in receipt of the benefit are to be forced to attend a monthly interview to assess whether they are fit for work, or risk losing 20% of their benefit. The aim of the tough new system is to reduce the growing number of people claiming disability benefit - currently 2.7m.

New claimants will face up to six "work-focused interviews" in the first six months of moving on to incapacity benefit under the proposals.

Mr Smith unveiled a package which included a proposed £40 a week extra for the first year a claimant is back at work where the job pays less than £15,000 a year. There will also be a £300 one-off grant to assist with the transition to work. People with more severe conditions - around 400,000 - will be exempted from the compulsory interviews, he said. Six pilot schemes involving 50,000 and 60,000 people are scheduled to test the proposals.

Disability groups broadly welcomed the new proposals but many had strong reservations about the interviews. The Disability Benefits Consortium welcomed the financial boost of the £40 a week "return to work credit" as a step forward.

Others, including Scope and the RNID, joined the consortium in welcoming the planned £300 grants. Richard Brewster, chairman of the consortium, said: "Proposals for a return to work credit and discretionary advisors fund show a welcome and practical commitment to supporting disabled people back into work. But interviews may be inappropriate for many claimants with little prospect of work."

Mr Brewster is "looking carefully" at the proposed changes to give "a detailed response" to the government.

A spokeswoman for Scope said they were concerned that the government had not taken enough time to evaluate if the proposals would work. She said Scope expected to take part in a consultation process over the coming months. "There needs to be more discussion even before the pilot schemes begin," she said.