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George Osborne and Iain Duncan Smith set out changes to our tax and benefits system

Monday, April 1 2013

George Osborne

In an article published today the Chancellor of the Exchequer George Osborne and Work and Pensions Secretary Iain Duncan Smith set out the changes to our tax and benefits system coming into effect from today.

In their article they write: "This week is a week of change to our tax and benefits system. It's a week where we back hard-working people.

"Too often under the last government those who worked hard and did the right thing were punished - while those who did the wrong thing were rewarded. Instead, in the coming days, we're doing three big things to back working families.

"First, we're fixing the welfare system. We're giving people on benefits the tools they need to get back to work, instead of trapping them in dependency. Our changes will ensure that the welfare state offers the right help to those who need it, and is fair to those who pay for it.

"Of course, if you listened to the shrill voices of the Left you'd think that every change to the welfare system, and any attempt to save money, marks the beginning of the end of the world.

"In reality, we are just restoring the original principles of the welfare state: that those who can work must work, and a life on benefits must not be more attractive than working. That is why this month we are starting to introduce the benefits cap.

"The British public do not believe that benefit claimants should receive higher incomes than families who are in work - in some cases more than double the average household income. This is about fairness.

"Equally, it is not fair that out-of-work benefits should rise faster than the incomes of those in work. So we're increasing discretionary working-age benefits by 1 per cent, starting this financial year, and for the next three years. This decision has not been taken lightly. However, given the current difficult economic times, the decision is a necessary one. It will save more than £2 billion pounds a year.

"At the same time we are safeguarding the incomes of the most vulnerable. Our new personal independent payments cover the added costs faced by disabled people. And our new "pensions triple lock" means the basic state pension will rise by 2.5 per cent in 2013-14 - up more than prices or earnings. Pensioners have worked all their lives and deserve our support.

"Today, more than one million people in England are living in overcrowded housing. And millions more are stuck on social-housing waiting lists, desperate for the opportunity to be given a home for their families. This is a scandal. To address this problem we need to use our social housing more fairly and effectively. That is why we are ending the spare-room subsidy from today.

"We will also ask people who earn good salaries, but remain in council housing, to make a bigger contribution. Households on more than £60,000 a year will be asked to pay more. It's not right that higher earners should get valuable social housing, subsidised by other people's taxes.

"At the heart of the changes we are making is the introduction of the universal credit. This single benefit will replace the current complex myriad of means-tested benefits. It will be simpler for people to navigate and harder for people to defraud, but most importantly it will make work pay. No longer will it be possible to be better off on benefits than in work. The pathfinder starts as planned this April.

"Of course, there's more we want to do. The Prime Minister has already set out some of the things that a Conservative government would do to create a fairer system and move people into work. Today, we are the party with the fresh ideas needed to tackle Britain's broken benefits system.

"And we are doing everything we can to make sure there are more jobs and extra help for those who want to work. We've launched the Work Programme - the biggest back-to-work programme this country has ever seen. We've created Universal Jobmatch - an online job-matching service which makes it easier for claimants to find work. And we're making sure Britain is a place people want to invest and create jobs.

"On Monday corporation tax is being cut, on the way to making our system the most competitive in the G20. The 50p rate of tax is going because it wasn't working - revenues fell, as the wealthy paid less. But there will be new taxes on the very richest so that in every year of this parliament they will pay a higher share of income tax than in any year of the last Labour government. Our approach is more effective: instead of setting uncompetitive rates that people don't actually pay, we're cracking down on tax avoidance and cutting unlimited tax reliefs. From Monday air passenger duty will be extended to private jets.

"To help create more jobs we're also introducing more support for research and development this week, reducing taxes on patents and investing in the hi-tech industries of the future.

"And on Monday part of the Help-to-Buy scheme announced in the Budget a fortnight ago starts. This helps families who aspire to buy a newly built home, and it helps the construction industry, too.

"Many of our reforms to banking also start this week, with the Bank of England taking over supervision and making sure that, in future, our banking sector does a better job supporting the rest of the economy instead of the other way round. Backing the private sector works. Since the election we have seen more than a million new private-sector jobs created, even in very tough economic times.

"Finally, we want a tax system that rewards hard-working people. We're making sure that you can keep more of your hard-earned money tax free.

"That's why we're increasing that tax-free personal allowance to £10,000 in two steps. Britain will see the biggest-ever increase in that tax-free allowance. It is the biggest tax cut in a generation, 24 million people will benefit, and it happens next Saturday. Next year we will reach the £10,000 tax-free personal allowance and working people will pay £700 less in tax than when this government came to office.

"We can do this to help hard-working families because we have taken tough decisions about our priorities.

"Under the last Labour government, even before the recession hit, they allowed the welfare bill to balloon by 60 per cent. In 2010 alone, payments to working-age families cost £95 billion.

"Now Labour oppose everything we're doing to clear up the mess, but offer no constructive alternative. Ed Miliband's position is controlled by the vested interests of the Left - his trade-union paymasters and radical Left-wing pressure groups.

"Bringing Labour's soaring benefits bill under control means we have been able to protect spending on the NHS and pensioners, cut the deficit by a third and help working families.

"What we're doing this coming week is making welfare fairer, helping to create jobs, and making sure you can keep more of what you earn."

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