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Welfare Reform Targets Workers’ Hours

By Sarah Neville and Kiran Stacey, Financial Times

Workers claiming state help with childcare and housing costs will be expected to seek longer hours, or risk sanctions that could include loss of benefits or a requirement to undergo training, in a radical shift in Britain’s welfare system.

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The proposals will make it one of the most demanding regimes in the world, say experts.

The aim is to ensure that people work as many hours as they can, reducing the benefits bill for a cash-strapped Treasury, and, in the process, cracking down on the black economy by providing an incentive for self-employed people to declare earnings accurately.

The Department for Work and Pensionsstressed that no one would be penalized for failing to increase their hours, only for failing to “engage” with attempts to persuade them to do so.

Paul Gregg, of the Center for Market and Public Organization at the University of Bristol, said Britain would be operating tougher conditions for people with jobs than either the US or any other European country.

Professor Gregg said: “It extends the job search conditions currently applied to the unemployed to a sizeable portion of the working population.”

Until now, he said, the approach had been: “We hassle you when you’re on benefits but once you move into work we leave you alone.”

In a separate development, Vince Cable, the business secretary, said benefits would rise with inflation, in a sign that George Osborne, chancellor, has given up his battle to scrap indexation.

Mr. Osborne had been looking at whether he could link benefits to earnings rather than consumer price inflation , which the government has previously promised would be the measure by which they were increased.

Under the new regime for people receiving in-work benefits, which could come in as early as 2013, individuals who can currently claim without further conditions if they are working 16 hours a week, would be expected to seek to more than double those hours to 35 a week and raise their pre-tax earnings to £212.80 ($340.40)—or £420 in the case of a couple. Lone parents with children between five and 13 could be required to take steps to raise their hours to 20 a week, with the aim of earning a minimum of £120.

The changes could also see self-employed people forced to look for a second job if they cannot demonstrate that they are trying to raise their earnings—a move which could reduce the number of people taking cash in hand to escape tax.

Ian Mulheirn, director of the Social Market Foundation think tank, questioned how much more it would cost “to effectively police hundreds of thousands of employees on short hours”.

Meanwhile, confirming that benefits would rise with inflation, Mr. Cable told BBC 1’s Politics Show : “We believe the most vulnerable people in society should be protected in these very difficult conditions.”

However he left some room for the chancellor to change the way in which inflation is measured, or how quickly benefits will rise, saying: “There are issues about timing and detail that will be clarified in the autumn statement.”