Sean O'Grady: Putting an end to poverty is not cheap

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The Independent Online

David Cameron is not the first politician to want to fix the benefits system and his plans fall into the usual pattern: sound analysis but few solutions that won't end up costing the taxpayer even more.

Mr Cameron is right to point out that incapacity benefit has not been geared to helping people find work. The numbers claiming it have stayed stubbornly high – 2.7 million a decade ago and around 2.5 million today – and the cost is about £6bn a year. People were transferred to incapacity benefit in the 1980s as a wheeze to get them off unemployment benefit and make those figures look better. Lately, ministers have replaced incapacity benefit with employment support allowance, which has a tougher medical test and is less generous. There is evidence that this has worked, although the real difficulty for anyone finding work is, as ever, the state of the economy: unemployment has gone up by a million in a year, not because people have suddenly become lazy or feigned illness but because we are in recession.

And there are high marginal rates of tax for people in work who want to earn more. The tax credits designed by Gordon Brown helped, but the only way of ending the "income trap" is to make loss of benefits less severe as you earn more. Or take those under £10,000 out of tax completely, as the Liberal Democrats argue. Either way, it will cost billions. Ending poverty doesn't come cheap.