Welfare bill plans to take 1 million off incapacity benefit

Radical changes to the social security system aimed at saving billions of pounds in incapacity and housing benefit payments were announced yesterday by John Hutton, the work and pensions secretary.

The government's welfare reform bill, published yesterday, aims to take 1 million of the 2.7 million claimants off incapacity benefit by replacing it with a new two-tier employment allowance to encourage people back to work. Higher rates will be paid to those who genuinely cannot work, lower rates to those refusing to be reassessed for a job.

The government also intends to change housing benefit payments to private landlords so that claimants get a flat allowance rather than the full rent charged by the landlord. This may dampen down the buy-to-let market, where landlords rely on renting out property to benefit claimants and the low paid.

The bill would also pave the way for the government to cut benefit to convicted fraudsters and implement a promise by Tony Blair to permit councils to evict anti-social families from council estates and housing association property.

Other parts of the legislation would enable the government to proceed with plans to encourage big charities, social enterprise trusts and private companies to bid for services provided by the state.

Mr Hutton said the main aim of the bill was not to save money but to get the jobless back to work. He told the BBC Today programme: "The rather grim statistic is that if you have been on incapacity benefit for more than two years, you are more likely to die or retire than ever get back to work. That's simply not good enough.

"What we want to do is to measure people's capacity to work more intelligently rather than simply measure their incapacity to work. We've got to see people as potential jobseekers and help them get back into the labour market."

The plans received a hostile response from some charities and thinktanks.

Gordon Lishman, director general of Age Concern, said: "This is a deeply flawed package. It will do nothing for millions of people already out of work and risks doing little for the hundreds of thousands who will apply for the new benefit after their 50th birthday.

"We agree with supporting people to get back to work, but the evidence shows that existing pilots are not working for people over 50.

"Unless the support on offer actually works, it is wrong to require people to participate or to pay them lower benefits in the expectation they will find jobs."

The head of social policy at the Institute for Public Policy Research, Jim Bennett, said the new system would be "unnecessarily complex" and confusing for claimants.

"This new welfare reform bill is welcome, but it is a concern that the opportunity to introduce a much simpler system for supporting people with a disability or a long-term illness is in danger of being missed," he said.

Unions warned yesterday that the rush to get people back to work could harm some claimants. Mark Serotkwa, general secretary of the Public and Commercial Services Union, said: "The danger is ... people will be quickly churned through and placed in jobs which may not necessarily be sustainable in the long term."