Family Credit

Ways and Means – in the House of Commons at 3:31 pm on 29th November 1994.

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Family credit has been an important and effective way of encouraging lone parents and couples with children to take employment. By providing top-up benefit for those in work it makes it worth while to give up unemployment and benefit dependency. At the moment it helps half a million people. Last year, I improved family credit by announcing the new child care allowance which was introduced in October.
I now intend to give low-paid and unemployed people with families an incentive to take full-time work. The existing structure of family credit strongly favours part-time rather than full-time working. But the majority of the people who have been unemployed long term are people who need to find full-time work.
I therefore intend to introduce a £10 a week premium for full-time workers on family credit to give a new incentive to take full-time work rather than stay on benefit. This will also give a substantial boost to the incomes of 345,000 low-paid families with children.
But childless couples and single people account for two thirds of the long-term unemployed. These people, of course, cannot, at present, claim family credit. I would like to examine whether introducing a new in-work benefit for childless people would be effective.
This is obviously a very big step and I have agreed with my right honourable Friend the Secretary of State for Social Security that we should try it out on an experimental basis. We intend to test run a new benefit through a pilot scheme covering 20,000 people. If the pilot shows that the benefit helps to get childless couples and single people back into work we will then consider introducing a national scheme.
I have also been impressed by an imaginative scheme pioneered by the training and enterprise council in Lincolnshire. This helps people build up full-time work by parcelling together a number of part-time jobs. The scheme is known in Lincolnshire as Jobmatch. I propose to extend it to help up to 3,000 people a year.
Overall, these measures constitute an extremely important and carefully thought-out package of support for unemployed people. It is no longer credible for some people to campaign for reductions in long-term unemployment and to reduce benefit dependency without having effective policies to deal with it. [HON. MEMBERS: "When?] It comes into effect steadily from this Budget. The details will be announced by my right hon. Friends the Secretaries of State for Employment and for Social Security. There will be a social security statement, in the usual way.
The days of priming the pump to cut unemployment are long since past. The Government are building reforms on reforms to remove at last the distortions and anomalies from the benefit system which discourage so many unemployed people from taking jobs.
This package aims to lift people from dependency into work and to smooth the transition from out-of-work benefits to modest in-work benefits. The measures will work because they are carefully put together and they are affordable and because they are being introduced at a time of strong economic recovery based on our sound economic policies so that more jobs are becoming available.
They are a set of effective policies to tackle the big problem of structural unemployment which faces the whole western world, and I believe that we are ahead of other countries in tackling it. I am sure that they will eventually gain widespread support—even from those who have no practicable ideas of their own. [Interruption.]
Opposition Members—I hear from their interruptions—still do not understand. If we look to the minimum wage, if we look to the social chapter, if we load costs on those employers who might otherwise create low-paid jobs, we will make matters worse. We are giving incentives to create jobs and making the transition from unemployment to work easier. We started work before the Borrie commission. We have come up with better recommendations and the Borrie commission and the Labour party have a long way to go before they even understand how the system works.