This week MPs voted to give a Second Reading to the Welfare Reform and Work Bill, which aims to move from a high tax, high welfare and low wage society to a low tax, lower welfare and higher wage society.

Three key principles underpin the reforms.  First, work is the best route out of poverty.  In 2010, nearly a fifth of households had no one working.  1.4 million people had been on benefits for most of the previous decade, and close to half of all households in the social rented sector had no one at all in work.  Since then, 2 million more jobs have been created, there are 2 million more apprenticeships, and the number of workless households has reached a record low.

The new benefit cap, under which no family can claim more than £26,000 a year in benefits, has been a success.  Capped households are more than 40 per cent more likely to go into work after a year.  Now it will be reduced to £23,000 in Greater London and £20,000 for others.

The second principle is that spending on welfare should be sustainable and fair to the taxpayer while protecting the most vulnerable.  Working-age welfare now costs the taxpayer over £200 billion a year.  90 per cent of families are eligible for tax credits.  In future this will be half of all families with children.

The third principle is that people on benefit should face the same choices as those in work and those not on benefits.  So in future child tax credit will be limited to the first two children.  This will not affect existing claimants.

By the end of the Parliament, the new National Living Wage will give more than 2.7 million people currently on the Minimum Wage a pay rise of more than £5,000 a year, while the amount people can earn tax free will rise to £12,500.

How much better to create jobs, increase pay and tax people less, rather than have people out of work or on low wages, on benefit and paying more tax.

Nick HerbertEconomy