Concerns raised over benefit system changes

Since it came to power in 2010, the coalition government has set about changing the benefits system. Part of this has involved some controversial freezing and cutting of benefits as it seeks to trim the deficit, while plans have also been unveiled for wider reforms.

The latest changes have seen the removal of job grants, in work credits and return to work credits, with the aim being to replace the existing system with one based on the 'Universal Credit'.

But the Trades Union Congress (TUC) disagrees. It suggests that this latest change simply hits the unemployed harder.

Its general secretary Brendan Barber said: "Removing this vital support for low income workers makes a mockery of the claim that no one will lose out under the new Universal Credit system."

He added: "'These important payments are designed to smooth the transition to work for lone parents and disabled people, who were previously long-term unemployed, by helping them with one-off costs such as appropriate work clothing or equipment."

Nor is the TUC alone in having concerns about the new system. A similar stance is taken by the Low Incomes Tax Reforms Group, which has argued the way the Universal Credit will work for small businesses and the self-employed will be likely to disincentivise people from taking paid work.

Its chairman Anthony Thomas argues bureaucratic burdens will be increased by this and also contends that the form of accounting the Department for Work and Pensions favours could "distort" the picture of incomes and lead to fewer benefits being received by self-employed workers than others with similar incomes.

The body has signed a letter urging a government rethink, with the Federation of Small Businesses (FSB) among the other organisations to have added its name.

FSB national chairman John Walker said the large number of people turning to self- employment in recent years has stopped recession leading to far higher unemployment.

He warned a more complex system could "remove a valuable route back into the labour market through self-employment" and run counter to the government's stated aim of simplifying the tax and benefit systems.

If such claims are justified and changes are not made, this could lead to more – and increasingly persistent – unemployment.

But while some might find themselves incentivised to stay on benefits, those who have debt problems may not be able to contemplate such an option as they will need more money to pay off what they owe.

And this could be particularly acute for those who were able to manage their monthly repayments until a sudden loss of income – such as redundancy or a business failure – led to this plunging and the ability to keep up payments being compromised or altogether destroyed.

When debt problems start to get out of control the key is always to seek help as soon as possible. The earlier assistance is sought, the more numerous the options and the easier the way out of it.

That could involve a debt management plan, debt consolidation or, in more serious cases where the amount owed is £15,000 or more, an individual voluntary arrangement.

In the meantime, it may be worth watching to see if the changes the government is making to the tax and benefits system are subject to some revisions to prevent them failing to achieve their aims.

By James Francis