A new 'think tank' report concludes that the complex system of benefits and tax credits should be subjected to radical simplification. It recommends that all of them are administered by a single agency and that applicants can make claim for any of them by filling in a single form.
The report notes that there are now more than 50 different benefits available through several different departments and agencies.
Benefit Simplification How and Why It Must Be Done (published by the Centre for Policy Studies) argues that the complexity of the system makes it damaging for claimants and excessively expensive for taxpayers.
According to the report's author, tax expert David Martin, complexity makes it hard for claimants to calculate their own entitlements and determine whether it is worth their while to take on extra work, increases the risk of error, overpayment and fraud and makes it difficult for the Government to control spending.
Benefits are administered not only by the Department for Work and Pensions, but also by HM Revenue and Customs, local councils and some other Government bodies. DWP manuals on how to apply benefits run into 14 volumes and 8,690 pages, while a separate four volumes totalling 1,200 pages cover Housing and Council Tax Benefits operated by local authorities. HMRC has a further 260-page manual devoted to tax credits.
The report points out that different benefits have different thresholds for eligibility, rules, payment periods, forms and decision-making processes, and changes in one benefit can have knock-on effects on another.
David Martin gives the example of a woman with a disabled son, eligible for a series of different benefits, who had to complete 10 application forms containing over 1,200 questions to get the support to which she was entitled.
He also cites the case of a woman working 30 hours a week and claiming a range of benefits, who loses 95.5p of every extra pound she earns because of the way her entitlements reduce as her income increases - effectively keeping her in a "poverty trap".
He argues that a single agency administering all benefits would be able to collect the information needed to determine applicants' entitlements on one form, and provide online calculators to allow claimants to work out how any changes in circumstances would affect their claims.
CPS director Jill Kirby said:
"In its 1997 manifesto, New Labour promised to 'decrease the bills of economic and social failure'. It has failed to do so.
"The Treasury now forecasts total social security payments in 2009/10 to be �186 billion - a quarter of all Government spending and more than is received by Government in income tax and corporation tax combined. At a time of economic crisis this is not sustainable.
"But for any reform to be effective, simplification is the essential first step."
A DWP spokesman said:
"We are making strides in simplifying a complicated system. We made it possible for pensioners to claim three benefits in one phone call without filling in a form and we are helping people claim benefits, tax credits and housing benefit in one visit to Jobcentre Plus by April 2010.
"It is not possible to have a one-size-fits-all approach when you are trying to support individual needs. We are working hard to do everything we can to make sure our customers get the help they need and claim everything they are entitled to."
Matthew Elliott, Chief Executive of the TaxPayers' Alliance, said:
"The welfare state has gone from being a safety net to stop people falling into poverty, to being a fishing net which entraps people in its complexity.
"Radical simplification would make it fairer for claimants and cheaper for taxpayers, because billions less would be wasted on bureaucrats and form-filling. Everybody would be a winner, so it is an urgent and long overdue reform to the benefits system."