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Plans announced for a universal credit system to improve the incentive to work

The secretary of state for work and pensions, Iain Duncan Smith, has announced the introduction of a 'universal credit' designed to simplify the benefit system and improve work incentives.

The new system aims to improve work incentives through a combination of improved earnings and/or lower benefit withdrawal rates, to smooth the transition into and out of work, reduce in-work poverty and simplify the system so that it is easier for people to understand, and easier and cheaper for staff to administer and cut back on fraud and error.

It is hoped the universal credit will simplify the benefits system by moving from the current benefit structure to a simple streamlined payment.

The plan is to move recipients from the current benefits and tax credits systems onto the universal credit starting in 2013 and finishing in the next Parliament.

The reforms will be set out in more detail in a White Paper later in the autumn and put before Parliament in a Welfare Reform Bill next year.