Duncan Smith admits hike in benefits will discourage work

IAIN Duncan Smith, the welfare secretary, yesterday admitted that the Treasury had discouraged people from working, after it increased out-of-work benefits in line with inflation while freezing various tax credits for those in employment.

Duncan Smith’s comments came after George Osborne used his Autumn Statement to freeze the working tax credit and to cancel plans to hike the child tax credit, while increasing out-of-work benefits in line with September’s CPI figure of 5.2 per cent.

He said: “Work will still pay better than benefits on the balance of things but the differential has been slightly reduced by that, we recognise that.”

However, the welfare secretary insisted that the disincentive would be removed when he introduces a new Universal Credit in 2013.

Liam Byrne, the shadow welfare secretary, said the government had broken “the cardinal rule of welfare reform – that work should always pay”.