Iain Duncan Smith: Fairness for the taxpayer – and for the claimant

Government hands out £200bn per year but ends up trapping people on benefits

Beveridge's vision for the welfare state was one of a safety net, a system that prevented people from falling into poverty at times of difficulty, but that expected people to do all they could to work: want and squalor were giant evils, but so too was idleness.

Sadly, this vision has been eroded over the past decades as the welfare state has become increasingly bloated, and dependency has become the norm in many areas. The benefits system we inherited is broken, trapping in idleness the very people it was designed to help.

Five million people are trapped on out-of-work benefits and almost two million children are growing up in workless households, seeing a life on benefits as normal. There is nothing progressive about destroying aspirations and limiting opportunities for the poorest. That is why I am pushing radical welfare reform.

Critics of the Welfare Reform Bill, which returns to the House of Lords next week, claim that our reforms are bad for children and that people will be pushed into poverty. Such accusations could not be further from the truth: this is a Bill that will dramatically improve the lives of disadvantaged children.

The universal credit alone will lift around 900,000 adults and children out of poverty, and that will restore to our welfare state the values on which it was built.

At the heart of the changes is the introduction of the universal credit. This single benefit will replace the complex myriad of means-tested benefits. It will be simpler for people to navigate and harder for people to defraud but, most importantly, it will make work pay. No longer will it be possible to be better off on benefits than in work.

For people who have been dependent on benefits for years, moving into work can seem a big risk. Universal credit will reward people who choose to go back to work by ensuring that they are better off than they would be on benefits.

Alongside this, we have the biggest back-to-work programme seen in a generation, the work programme, where private and voluntary organisations are paid to get someone into work and keep them there. Together with our reforms, this sends the signal that a life on benefits must not be more attractive than working.

That is why we are introducing the benefits cap. The public do not believe that claimants should receive higher incomes than families in work – in some cases more than double the average household income.

There has been a lot of scaremongering about the proposed cap. Let me be clear: £26,000 a year is the equivalent of a salary of £35,000, and it is a simply wrong that people who don't work can get substantially more money from the state than many working people earn.

Furthermore, we will exempt people who are in work and claiming tax credits, war widows or widowers, disabled people in receipt of disability living allowance, as well as those who can't work and get the highest level of support from employment and support allowance.

This is the right thing to do, and more than three-quarters of the British people agree. The last government saw the cost of welfare spiral during a time of economic growth. It is the low-earning taxpayers who have had to pay for this huge cost – and they have to make tough choices every day. People on benefits should be expected to do the same.

How many of us know hard-working families who have to commute some distance to work because they either cannot afford to live nearby or chose to live where property is less expensive?

No longer can the taxpayer continue to write blank cheques to pay for benefit claimants to live in properties they can only dream of.

The last government tinkered around the edges of the benefits system and retreated from radical thinking when the going got tough. Welfare budgets were allowed to rocket, and the Government now distributes an astonishing £200bn each year – the kind of figure that represents the entire GDP of countries such as Belgium, Greece and Austria.

The challenge for the Labour leader, Ed Miliband, is to support our reforms. Labour has said it is in favour of welfare reform yet Labour MPs vote against it, again and again.

My message is clear: we must restore fairness to the claimant through making work pay and fairness to the taxpayer by ensuring money isn't wasted on trapping people on benefits.

Iain Duncan Smith is Secretary of State for Work and Pensions