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04 October 2010

Chancellor announces reforms to the welfare system

The Chancellor announced today two significant reforms to the welfare system:

Benefits Cap

From 2013, household benefit payments will be capped on the basis of median earnings after tax for working households, which we estimate to be around £500 per week by 2013.  All Disability Living Allowance claimants, War Widows, and working families claiming the working tax credit will be exempt from the cap. The cap will apply to the combined income from:

Child Benefit

The Government will withdraw Child Benefit payments from all households containing at least one higher rate taxpayer by 2013. This will save around £1bn a year from the welfare bill. HMRC will implement this policy through the existing PAYE and Self-Assessment structures. The vast majority of families will still receive the child benefit at the current rate.

Notes for Editors

1. Benefits Cap

2. Child Benefit

3. Last year the Government spent £192 billion on welfare payments.  Spending on welfare increased by 45% in real terms in the decade to 2009-10

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