Lilley targets low-paid without children in pilot of new benefit

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The Independent Online
NICHOLAS TIMMINS

Public Policy Editor

The Government will today publish a Green Paper detailing its pilot project to pay benefits in work to people without children - a move that in time could transform the social security system, supporting the childless in work rather than paying them benefit on condition that they do not work.

The Green Paper pre-empts studies Labour is undertaking on possible in- work benefits to cut unemployment. And it is likely to intensify the argument over whether a minimum wage is needed.

Peter Lilley, Secretary of State for Social Security, yesterday described the move as "a major new development in social security", telling a seminar at the Policy Studies Institute there was "a good case for an in-work benefit" but the case was "not yet proven".

The pilot - announced by Kenneth Clarke, the Chancellor of the Exchequer, in last November's Budget - is expected to include some 20,000 people over a three year period, starting next year, with the scheme's impact being evaluated to ensure both that it works and that it does not significantly distort the labour market.

It is the first use of new powers that Mr Lilley took in the Jobseeker's Act to allow pilot projects of new benefits.

The benefit will broadly mirror family credit, which already tops up wages for more than 600,000 families. Unlike family credit, it will be targeted at those without children.

The scheme will inevitably raise fears, particularly on the left, that employers will cut wages, forcing the state to subsidise low paid jobs - an argument that Labour is likely to say strengthens the case for a minimum wage.

Mr Lilley rejected that, yesterday, saying the effect of a minimum wage would be "that anyone whose work is of less value than the minimum wage simply won't find a job".

"Far from getting on the ladder of employment, they would find that the bottom rungs had been cut off and they would languish on unemployment benefits," he said.

If the benefit worked, however, Mr Lilley added, "it should be good for those taking it up, allowing them into work where they can acquire the skills that will allow them to work themselves up and off benefit. It should improve their long term prospects. It should be good for taxpayers, because the total cost should be less than paying people the whole cost of having them out of work, and it should be good for the economy - more people contributing and fewer people languishing without putting their talents to good use."

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