I don't think people quite realize that, yet. This stuff isn't about efficiency or cost-saving, not even unnecessarily or inhumanely- even if it worked, the amount of money invested into this stuff is so bare there isn't really anything left to save- it's absolutely about humiliating poor people. Conservative politicians have whipped up such a hate-storm against the poor that they have to be seen to be doing something, and degrading measures like this allow them to pose as being tough on the poor without having to make the sort of very deep, general cuts that ultimately do capital more harm than good.
I think it's also about creating a sense that the poor are different, which didn't really exist when the welfare state was first created. Social security as I remember it was always presented as a kind of collective insurance policy - we pay into things like the NHS, the State Pension and unemployment benefits through taxes when times are good, with the understanding that we might not ever need them but on the off-chance that one day we might. The point was always that the young, healthy employed people of today might tomorrow be old, sick or unemployed. Nowadays - I think post Thatcher - the rhetoric is far more that the poor (and particularly the unemployed) are a kind of species apart, and that benefits are something that 'we' the taxpayers give to 'them' the poor. The Thatcherite myth that hard work necessarily brings economic prosperity is attractive and comfortable - it stops you worrying, because it totally rules out the possibility of things going wrong for 'good people like us' - but it's horribly damaging to the people it excludes.
Taken to its logical extreme, I note that on the recent propaganda leaflets with the government spending pie-charts pensions - the ultimate 'pay in so you can take out' scheme - were placed in the same slice as all other benefits without even an explanatory note, so this rhetoric has become really quite absurd.