Complex benefits system to be replaced by one payment

Britain's complex system of benefits will be swept away and replaced with a single payment to claimants under plans being trumpeted by the Government as the biggest welfare shake-up for decades.

Iain Duncan Smith, the Work and Pensions Secretary, will today unveil proposals to streamline and simplify payments, as well as improved incentives for the unemployed to swap life on benefits for work. He will describe the moves as the biggest revamp of a "broken benefits system" for a generation, but critics will argue it is just a cover for heavy cuts in welfare spending.

Mr Duncan Smith will suggest replacing the 51 benefits currently available to the unemployed, as well as income-related benefits for the low-paid, with a single benefit covering all people of working age. It would also incorporate the cash currently paid out under Gordon Brown's flagship tax credits scheme, which would effectively be abolished.

Payments would take into account claimants' circumstances, such as numbers of children and housing needs, and could be adjusted monthly using new computer software being developed by the Government. Ministers say the planned moves would make the benefits system easier to navigate as claimants would no longer have to complete a series of forms.

There should also ultimately be a saving for the Government in administration costs, although there could initially be a sizeable bill for setting up the new single benefit.

Government sources called the plans "the most radical root and branch overhaul of the system in decades". They said five million people had been "abandoned" to live on out-of-work benefits, including 1.4 million on benefits for at least nine of the last 10 years.

The proposals will be set out in a discussion document published today by Mr Duncan Smith. It falls short of a formal white paper setting out plans for legislation, but is likely to form the basis of a reform blueprint next year. The publication follows wrangling between Mr Duncan Smith and the Treasury over how the system can be redesigned to improve financial incentives to work with few costs for the taxpayer.

In last month's Budget, the Government announced plans to cut spending on welfare by £11bn by 2014. George Osborne, the Chancellor, has also signalled a drive against the cost of benefits paid to the sick and disabled and is pressing the Department for Work and Pensions to identify further savings.