Looking at it, my cynical answer is that the Labour Party has brought this state of affairs about simply by being in power for the last thirteen-odd years. The fact is, that when one party becomes so dominant, the other side- in this case the Tories- will become increasingly vehement in its condemnations and stories like this will find their way into the news. The fact that the benefits should have been cut when the husband dropped his job seems to have passed most people by. Either the story isn't giving all the facts or the family is guilty of benefit fraud. In either case, it is not the system that is to blame but the individuals making and assessing the benefit claims. Of course, it is easier to make a party-political point by ignoring these inconvenient facts.
It was exactly like this in '97 when Labour ousted the Tories. Their campaign was essentially negative, focusing on party sleaze, the unequal society and a damaged economy produced by the previous 18 years of the Conservative government. The fact that the economy wasn't in that bad a shape (for the first four years of the Labour government, the Tory fiscal plans were strictly adhered to by the then Chanceller, Mr Gordon Brown) passed the electorate by. Quite simply they were tired of the Conservatives and they wanted the change that Labour, under Tony Blair, promised and as a result, they were willing to swallow the extravagant claims of New Labour about what they would do and about how incompetent and corrupt the Tories were.
The situation today is essentially similar. Gordon Brown is a deeply unpopular figure with the majority of electorate and as a result they are willing to overlook David Cameron's and Nick Clegg's lack of substance if it will get rid of Brown. Personally, I find this a deeply unfortunate situation as it shows that the campaigns are focusing more on the personalities- and the perceived personalities more than the real personalities, to boot- of the party leaders than on the policies that the parties stand for. In a sense, this is nothing new: Margaret Thatcher's Conservative win against Michael Foot's Labour Party in the '83 election was essentially a matter of personality. People were prepared to vote for "that bloody woman" if only because the public's perception of Michael Foot was so poor. Despite and Oxford degree and a distinguished career in journalism and in parliament, he was portrayed by the press as a bumbling, senile eccentric and as such he- and by extension his party- became unelectable. It was then, that the Labour party re-evaluated its methods and, to a great extent, its core beliefs to become the powerful publicity machine that won the election in '97.
The trouble with the effectiveness of the New Labour election machine is that it has been copied by the Tories and Liberal Democrats. Thus we have the Blair-like figures of Cameron and Clegg leading their parties and the emphasis is all on how the country needs a change from Labour and not on the actual policies these two parties represent. The introduction of the party leader's debates- and Clegg's impressive performance in the first of these- has skewed attention even more to the personalities of the leaders, which is something that I find deeply distasteful. In Britain, we elect a party to form a government and not a president to rule.
Tony Blair's approach was essentially presidential and it worked in elections against such personality vacua as John Major, William Hague and Iain Duncan Smith. However, its result has been a weakening of parliamentary democracy to such an extent that the government has been able to introduce most of what it wanted pretty much impeded. As a result, the Labour party has been able to backtrack on the significant promises that it made in '97. In education, they removed Grant Maintained Schools only to replace them with Academies, which are essentially the same thing, just with fewer checks on their power. They promised to widen participation in Higher Education and yet one of their first acts was to impose tuition fees, when even Thatcher's Tories shrank from abolishing free university education. And they promised to reform the Welfare and Benefit system, the better to close the gap between the rich and the poor.
The trouble is, the reforms that were brought in, with tinkering in the tax system and abolishing the 10% income tax band to replace it with a 20% tax band meant that suddenly, people who were working were faced with such a tax bill that it proved better to be on benefits than to work. A system of Tax Credits was introduced to prevent this. However, the claiming of these has proved to be such a complex process that billions in such credits are unclaimed each year, predominantly by those who need them most. So rather than face such a complex system, people choose not to take low paid jobs, because it's easier and more lucrative to claim Job Seekers' Allowance than it is to take a low paid job and claim Tax Credits.
So to reform the system I would do the following:
1) Abolish tax credits and instead alter the income tax allowances, raising the threshold before income tax is due and reintroducing that 10% tax band
2) Cut a great deal of the bureaucracy out of claiming Job Seekers' Allowance. Having been in the position of claiming this in January, I have to say that it was a system designed not so much as to help me find work but instead to generate figures for the Office of National Statistics. The claims advisors wanted me to predominantly reach for unskilled office work rather than teaching work as a) they had no expertise in how to find such jobs and b) teaching counts as professional work and they were facing pressure to downplay the number of professionals unemployed as a result of the economic situation. As a result I had to run through hoops that had no impact on my finding a job and actually hampered my attempts to find work.
3) Remove the culture of league tables that distort activity. Benefits offices are judged on how many claims are processed not on how the accuracy of how each claim is dealt with. People talk with horror about means testing but, in the end, it exists already. It should be formalised to prevent anomalies of either excessive stinginess or excessive leniency.
I think, that pretty much covers it after my somewhat historical digression.