The welfare secretary said the New Enterprise Allowance (NEA) scheme would offer financial support and business mentoring to enterprising people who are unemployed.
He said: “If you have been unemployed for six months and want to start your own business we want to support you. We will provide business mentoring and a financial package worth up to £2,000 to get your business up and running. We want to see 10,000 new small businesses by next year.”
Members of the NEA scheme will get access to a low cost loan of up to £1,000 to help with start-up costs, as well as a grant worth up to £1,000, paid out in weekly instalments for six weeks.
A network of successful local businesses will be asked to provide mentoring and support through a website, described as “online dating for entrepreneurs” by an aide to Duncan Smith.
Duncan Smith made the announcement as he unveiled the “biggest reform of welfare in a generation”. A new Universal Credit will replace the myriad of benefits that are currently on offer, including housing benefit and job seekers’ allowance. Officials in the Department of Work and Pensions estimate there are 31 out-of-work benefits currently available, rising to 51 if one counts supplementary and top-up benefits.
Crucially, the Universal Credit will eventually be available to people in low-paid employment as well as the unemployed, to ensure that no-one loses out when they take a job.
But Duncan Smith had to make big concessions to convince the Treasury to give the green light to his reforms. The Universal Credit will now be phased in over ten years, rather than five, while there have been big cuts to the overall benefits bill, including the scrapping of child benefit for higher rate taxpayers.
He also pledged a clampdown on benefit fraud would not penalise those in genuine need.
He said: “I say to those... who are genuinely sick, disabled or are retired: you have nothing to fear. We will crack down on fraud and help able people off welfare. This means we will have enough resources to provide peace of mind to the very vulnerable.”