THE Government could break the link between benefits and inflation in order to save money on the £84 billion bill for working-age welfare, Prime Minister David Cameron suggested today.
The change was among a set of radical reforms to the benefit system floated by the PM in a speech setting out his determination to end the “culture of entitlement” which sees some people living long-term on welfare with higher incomes than neighbours who work.
Other ideas floated by the PM include withdrawing housing benefit from under-25s, removing the right for high-earners to keep their council homes, a reduction in the £20,000-a-year cap on housing support and limits on the additional benefit received by families with three or more children.
But a proposal to introduce regional welfare levels - so that people in areas where pay is lower also receive lower benefits - was removed from the speech at the last minute.
Shortly before Mr Cameron spoke in Kent, his official spokesman briefed reporters that he would say: “We are looking at whether public sector pay should be more responsive to local pay rates and that is something we should look at for benefits too.”
However, the line, which was in early drafts of the speech, was dropped before the PM delivered it.
New requirements could be introduced for claimants to learn to read and write, to draw up a CV and to take action to improve their health in order to continue receiving benefits, the PM suggested.
And single parents could be required to prepare to go back to work once their child has reached three years old.
The Government is already cutting the point after which lone parents have to seek work from seven to five years after their child’s birth. But Mr Cameron suggested that once the child is three, parents should at least be spending part of the week going to the JobCentre, preparing their CVs and learning new skills.
Mr Cameron stressed that he was not setting out policy plans but trying to start a national debate on the future of welfare.
He said he aimed to work with his Liberal Democrat partners on some of the ideas over the next few years, but that others might feed into the Conservative manifesto for the general election expected in 2015.
Out-of-work benefits like Jobseeker’s Allowance have traditionally been raised in line with inflation in September, and the decision to stick with this system meant that they increased this year by 5.2% - far more than the pay rises received by most workers.
Mr Cameron said it was time to ask “whether this is the right approach”, adding: “It might be better to link benefits to prices unless wages have slowed, in which case they could be linked to wages.”
On regional benefits, the PM’s spokesman said: “We are looking at the question of whether or not it makes sense that you set all benefit levels at a national level or whether or not there should be some local or regional dimension.
“Clearly, wage rates vary around the country and what someone receives in benefits compared to what they could potentially get by going into a job has an impact on the incentives they face. That is the logic for looking at this question.”
Aides confirmed that the question had been discussed within Government, but stressed that it was not included in the PM’s speech.
Mr Cameron said that the system for working-age benefits inherited by the coalition Government had gone “truly awry” and created “a mess of perverse incentives, mind-numbing complexity and real unfairness”.
“We have in some ways created a welfare gap in this country between those living long-term in the welfare system and those outside it,” he said.
“Those within it grow up with a series of expectations - you can have a home of your own, the state will support you whatever decisions you make, you will always be able to take out no matter what you put in.
“This has sent out some incredibly damaging signals. That it pays not to work. That you are owed something for nothing.
“It gave us millions of working-age people sitting at home on benefits even before the recession hit. It created a culture of entitlement.
“And it has led to huge resentment amongst those who pay into the system, because they feel that what they’re having to work hard for, others are getting without having to put in the effort.”