94/183 29 November 1994 PETER LILLEY ANNOUNCES Pounds 600m PACKAGE OF NEW WORK INCENTIVES Peter Lilley, Secretary of State for Social Security, today revealed the details of a far-reaching package of new measures to improve the take-home pay of people working full-time on modest incomes, to provide new incentives for those seeking work and to boost jobs by reducing costs to employers. He also announced the launch of a pilot programme, unique in social security, aimed at testing the effectiveness of in-work benefit help to couples and single people without children. Together, the measures will assist around three-quarters of a million people a year to get into work more easily and be better off there. The major elements of the package will: * bring Pounds 10 a week more for people in receipt of Family Credit and Disability Working Allowance working more than 30 hours a week .... worth Pounds 205m a year and helping 345,000 families from July 1995 * allow formerly unemployed people and income support claimants who have been out of a job for six months or more to keep Housing Benefit and Council Tax Benefit at its full existing rate for four weeks after taking up a job ... worth Pounds 50m a year and helping 440,000 people from April 1996 * give a full national insurance rebate for up to 12 months for employers who take on a person who has been out of work for two years or more. 120,000 people a year will be helped by this measure and employers will save up to Pounds 45m. And, in a further boost to jobs, employers' NI contributions will be reduced by 0.6% for each employee earning under Pounds 205 a week. Overall, taxes on business will be cut by Pounds 300m * introduce on a pilot basis a new benefit similar to Family Credit but aimed at couples and single people without children. This will be tested in eight locations over a three year period from October 1996 to see whether it might be effective as a national scheme. Some Pounds 75m will be provided over the three years of the pilot. A consultation document on the proposals will be published next spring * make provision for Family Credit to be arranged within five days for almost all new claimants, to bring speedier benefit help for 400,000 families a year wanting to take up work or already in work. A pilot study will begin in 1995 heading for full implementation from April 1996. Mr Lilley said: "These exciting and far-reaching measures tackle directly two serious obstacles: financial barriers that hinder unemployed people from taking up jobs and lack of incentives or reward for working harder or longer hours. They will also enable and encourage employers to provide more jobs. "Unemployed people tell us that three things make them hesitate over whether to take work: uncertainty about how to manage between leaving benefit and receiving the first wage, uncertainty about meeting the rent, and uncertainty about being better off. We are tackling all three issues and building substantially on our proposals for a Back to Work Bonus which will be introduced with the new Jobseeker's Allowance and into Income Support. "This bonus, worth up to Pounds 1,000 in a lump sum, will help 150,000 part-time workers on the two benefits when they take jobs with longer hours. I welcome the Chancellor's announcement that the bonus will be tax free. "The additional month's help in Housing Benefit and Council Tax Benefit for unemployed people and Income Support claimants will remove uncertainties about meeting the rent in a new job. We plan to discuss with the local authority associations a package of incentive measures to ensure that by the end of the four weeks, new workers with a continuing entitlement to benefit will have it put into payment immediately. "And we will also take steps to ensure that people who move home to take a job are guaranteed in the first 4 weeks at least the same level of housing help as at their old address. "I also intend to remove the main disincentive to work longer hours while receiving Family Credit. The benefit currently provides financial help to 580,000 families to help them be better off in work - but because benefit reduces with higher earnings, a parent working 40 hours a week receives little more in total income than someone working 16 hours a week. That must be wrong. "The Pounds 10 a week extra for those people working longer hours will ensure that they receive some reward for their extra labours. And this measure will also apply in Disability Working Allowance. "Special arrangements will mean that Family Credit and Disability Working Allowance recipients who also receive Housing Benefit and Council Tax Benefit will get the full value of their extra benefit. This is a major new measure to beat the poverty trap and make work pay. "Unemployment has fallen rapidly - by 450,000 since its peak. The national insurance "holiday" incentive will encourage employers to take on unemployed people. "The incentive and other contribution changes will help bring down unemployment at an even faster rate and create new jobs. They will be greatly welcomed by employers and their new workers. "Finally, this package includes a radical innovation in social policy, a unique experiment in social security. Family Credit has shown its value in helping families move into work and stay there. We intend to build on its success by testing an in-work benefit for couples and single people without children. "Once the three year pilot is completed we will be able to evaluate its effectiveness and see whether it would be worthwhile to implement the programme on a national basis. If successful it could be invaluable in enabling more people to get back into work and to stay there. I will be publishing a consultation document in April on our plans." ENDS