Benefits could to be paid onto smart cards to stop claimants wasting taxpayers money on alcohol or gambling.
Iain Duncan Smith today announced the first trial of pre-paid cards, which would restrict where the jobless or poor can spend their money.
The Work and Pensions Secretary said he was increasingly concerned about the way benefits could be used to fuel addictions, instead of putting people on the road to work.
Mr Duncan Smith claims that for a ‘significant’ number of people on benefits, the struggle to manage their household finances makes it harder for them to buy the essentials and to look for work.
Speaking at the Tory party conference in Birmingham, he said: ‘I have long believed that where parents have fallen into a damaging spiral – drug or alcohol addiction, even problem debt, or more – we need to find ways to safeguard them – and more importantly, their families, their children, ensuring their basic needs are met.
‘That means benefits paid should go to support the wellbeing of their families, not to feed their destructive habits.
‘I can announce that I am testing prepaid cards, onto which we will make benefit payments, so that the money they receive is spent on the needs of the family – finally helping break the cycle of poverty for families on the margins, change we can be proud of.’
The government claims that families will be able to ‘take more control over their finances’ if they are restricted in what they can buy.
They hope to discourage people from buying alcohol, drugs and betting but making the cards compatible only with a limited number of retailers.
Ministers warn that too many people struggling on a budget end up taking on more debt that they can afford.
As a result there is increased demand for local services, with children more likely to be taken into care and families at risk of conviction.
Under the plan announced today, a pre-paid card payment system for ‘vulnerable claimants’ will be monitored in a trial in North Tyneside.
The cards are already in use, but ministers want to see how they could be restricted so they cannot be used in certain places like off-licences or casinos.
A future Conservative Government would use the results of this trial to inform a full scale pilot.
It comes as the government steps up its attack on Britain’s welfare bill.
Chancellor George Osborne today announced plans to freeze working-age benefits for two years from April 2016.
He said the move would save £3billion, but it will see 10million families left on average £500 worse off over the two years.
Under the surprise plan announced today, the Conservatives would freeze working age benefits from April 2016 for two years.
By 2017-18, the move would save £3.2 billion-a-year, compared to allowing it to rise in line with inflation.
It means that benefits claimants will see their incomes fall in real terms, with their money not going as far in the shops.
However, benefits paid to disabled people, carers and pensioners are unaffected, along with some smaller benefits like statutory maternity pay.
Mr Osborne said: ‘Working age benefits in Britain will have to be frozen for two years. This is the choice Britain needs to take to protect our economic stability and to secure a better future.
‘The fairest way to reduce welfare bills is to make sure that benefits are not rising faster than the wages of the taxpayers who are paying for them. For we will provide a welfare system that is fair to those who need it, and fair to those who pay for it too.’
The move will pile pressure on both the Lib Dems and Labour who have opposed further welfare cuts, despite proving hugely popular with voters.
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