'Regional benefits' would cut payments
The Westcountry's welfare bill could be slashed under proposals to bring state benefits in line with local wages – cutting payments to thousands of households in the region.
In a keynote speech, Prime Minister David Cameron yesterday floated a raft of radical reforms to end the "culture of entitlement" that he argues is causing deep social divisions, and to scale back £84 billion of Government handouts.
Among the most controversial ideas being looked at is a new system where working-age welfare such as unemployment and child payments are pegged to local salaries and living costs.
The proposal, which would see people in less expensive areas receiving lower benefits, was removed from the address at the last minute, but Downing Street has confirmed the idea is on the table.
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If it goes ahead, households receiving benefits in Cornwall, Devon and Somerset would likely see social security payments reduced because of the region's low wages.
Other ideas suggested by Mr Cameron include withdrawing housing benefit from people under 25 and removing the right for high-earners to keep their council homes.
At the heart of the ideas, which are not Government policy but seen as the start of a national debate, is to ensure that people living on benefits do not command incomes higher than neighbours who work.
Mr Cameron said the benefits system inherited by the coalition Government had created "a mess of perverse incentives, mind-numbing complexity and real unfairness".
"We have in some ways created a welfare gap in this country between those living long-term in the welfare system and those outside it," he said.
Other ideas include a reduction in the £20,000-a-year cap on housing support and limits on the additional benefit received by families with three or more children.
Shortly before Mr Cameron spoke in Kent, his official spokesman briefed reporters that a system of local benefits would be included in the speech.
He said: "We are looking at whether public sector pay should be more responsive to local pay rates and that is something we should look at for benefits too."
However, the references, which were in early drafts of the speech, were dropped before the Prime Minister delivered it.
After the speech, employment minister Chris Grayling said Mr Cameron was "entirely sensible" to raise the issue of regional benefit levels.
While housing benefit is set according to local rent levels, all other benefits are paid at the same rate in all parts of the UK, regardless of local wages and prices.
For example, the Jobseekers' Allowance unemployment benefit is a flat £71 per week for over-25s. Under a local benefits system, the dole payment could be higher in costly London than, say, Barnstaple, Exeter and Truro.
The Westcountry's welfare bill is around £1.4 billion a year, official figures showed last year.
Another idea could be a regional or local benefits cap that reflects the cost of living.
Ministers are planning to limit total welfare payments to £26,000-a-year, but it affects few households outside of London and the South East.
The proposals, from the Conservative side of the coalition, will struggle to secure support from Liberal Democrat backbenchers, who are already fiercely opposed to local public sector pay plans.
Adrian Sanders, Lib Dem MP for Torbay, said: "When you take housing costs out of the equation, it costs just as much to live on the breadline in London as it does in Torbay; just because wages are lower in Torbay does not mean that there is any logical justification for reducing benefits in Torbay."
But George Eustice, Conservative MP for Camborne and Redruth, said it is "incredibly important" to look at benefits reform.
He said: "It is wrong that some people who are working and pay their way take home less than those who don't work and live on benefits.
"We need to look at these things, including localising benefits – which we already do with housing benefit."
Ben Bradshaw, Labour MP for Exeter, said he supports welfare reform that is "fair and will work but what Cameron is actually doing rather than saying is the reverse".
"The idea of inferior social security in the South West is as flawed as his plan for lower pay here and Labour will fight both all the way," he went on.