For all the talk of austerity and welfare cuts, it might be presupposed that spending by the Department for Work and Pensions (DWP) has fallen and will continue to fall in the future.  However, the Department’s own figures present a more nuanced and possibly unexpected picture.

The total benefit and tax credit expenditure in real terms did peak at £209.8bn in 2012/13 and is forecast to fall to £207.2 in 2015/16 (a reduction of only one per cent), but thereafter it is expected to increase, so that by 2019/20 it is £214.1bn.

The Coalition’s plans mean that total benefit and tax credit expenditure is expected to increase by 5.5 per cent between 2010/11 and 2019/20.  But this total conceals a significant variation in who will benefit from the spending.  Over this period spending on pensioners will increase by 10.7 per cent, whilst children and those of working age will see a fall of 0.9 per cent, with spend on tax credits falling by 1.9 per cent (see graph below).  This is in line with recent announcements that benefits for pensioners will be protected post-election.  The universal nature of many pensioner benefits means that this protection covers both poor and affluent pensioners.

The estimates do not include George Osborne’s Conservative Party conference announcement that if they win the 2015 general election, there will be a £12bn cut in the welfare budget for 2016-17 to 2017-18 to help eliminate the budget deficit by 2018.  To achieve this a future Conservative Government would freeze most working age benefits for two-years, (“saving” £3.2bn by 2017-18); reduce the benefit cap to £23,000; and they would seek to end youth unemployment by giving unemployed 18- to 21-year-olds six months to find work or training before their Jobseekers’ Allowance is withdrawn.  Implying that that the proportion of spend on working age benefits will fall to around £81bn in 2017/18.  Whether this is feasible let alone desirable is unclear.

Bruce Stafford, Simon Roberts and Joe Sempik

Appendix: expenditure outturn and forecast table

Benefits and Tax Credits, GB, £ billion, 2014/15 prices

  2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
  Outturn Outturn Outturn Outturn Forecast Forecast Forecast Forecast Forecast Forecast
People of working age and children 97.1 97.8 98.1 94.8 94.2 92.6 92.8 93.7 95.2 96.3
Pensioners 105.3 107.5 111.7 112.7 114.1 114.6 114.9 116.0 117.0 117.9
Total 202.3 205.3 209.8 207.5 208.3 207.2 207.7 209.7 212.2 214.1
   of which tax credits 30.6 30.8 30.2 29.4 29.1 28.3 28.6 29.2 29.8 30.0

Source:  DWP (2015) Outturn and Forecast: Autumn Statement 2014

A copy of this blog can also be found at:  Public and Social Policy

Shortly after the Coalition Government was formed it introduced an Emergence Budget, and since then it has held 5 Budgets and 5 Autumn Statements.  The Chancellor of the Exchequer has used these to announce a series of cuts to public expenditure.  These announcements have affected a number of public services, notably social security (or welfare benefits and tax credits).  However, what contribution has social security made to the overall cut in public spending?

One answer is provided by data published by the Office of Budget Responsibility (OBR).  The OBR lists Treasury’s policy measures and the amount of expenditure involved.  In some instances the policy measures result in an increase in public spending; for example, the additional amount made available to local authorities for discretionary housing payments.  However, cuts in social security spending dominate so that the net effect of the measures is for a financial saving in each year.

The Table below shows that since 2011-12 changes in social security spending account for a significant proportion of the cuts and they peak at 53% for 2014-15 and 2015-16.  No other spending head makes as much a contribution to total spending savings as social security.

Spending 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
Social security £m 375 2090 6655 12260 16915 19748 22463 23713 25006
% 7% 26% 32% 50% 53% 53% 47% 43% 44%
All policy measures £m 5245 8025 20545 24540 31945 37336 47971 54759 57179

Source: OBR, Policy measures spreadsheet.

Note:  Some of the policy measures are coded as ‘Social Security benefits’ but other spending heads  also include social security expenditure, notably tax credits.  The figures presented in this Table include all social security related spending in the OBR data regardless of their budget spending head.

The implication of the Table is clear; austerity is significantly underpinned by cuts to the principal system used in the UK for protecting the most vulnerable in society.

A copy of this blog can also be found at:  Public and Social Policy

Ed Miliband has announced that 18-21 year olds will no longer have an entitlement to Jobseeker’s Allowance (JSA), but will be eligible for a means-tested training allowance.  The proposal appears to be based on an IRRP report, No More Neets, published in November of last year.

A report in The Guardian suggests that the loss of entitlement applies to young people with a qualification below Level 3 (equivalent to an A level or BTEC National Certificate) and would affect 70 per cent of 18-21 year olds.  The proposal is not simply about improving the school to work transition or the competitiveness and productivity of the UK economy, but also about saving public expenditure (an initial saving of £65m).  However, it’s not clear if the saving estimate includes the additional investments costs that training providers will incur to establish the extra capacity required for taking on more trainees or administrative costs.  Presumably the training will be accredited, otherwise why would prospective employers take the programme into account in recruitment decisions, and this will require someone (OFSTED?) to act as a regulator.

There are three potential issues that a future Labour Government would have to consider if the proposal is to be successfully realised.  The first is the quality of the training (hence the need for monitoring and regulation).  Past youth training schemes haven’t always enjoyed a good reputation in terms of the standard of training.  It’s critical that, at least this time, high quality training is provided.  Secondly, there are always exception – young people who should not be subject to this regime, for instance, those estranged from their parents or will young children.  Thirdly and critically, this is a policy addressing the symptoms of an education system that is not fit for purpose.  A ‘proper’ education system would obviate the need for this programme.  So at best it should be regarded as a short-term fix, whilst more fundamental changes are made elsewhere.

At the Conservative Conference Cameron repeated his call for the ending of Housing Benefit for those aged under 25 years (see my post for 25 June 2012).  He did not name Housing Benefit, or what will be the housing component of Universal Credit, in his speech instead he said:

‘There are still over a million young people not in education, employment, or training.

Today it is still possible to leave school, sign on, find a flat, start claiming housing benefit and opt for a life on benefits.

It’s time for bold action here.

We should ask, as we write our next manifesto, if that option should really exist at all.

Instead we should give young people a clear, positive choice:

Go to school. Go to college. Do an apprenticeship. Get a job.

But just choose the dole? We’ve got to offer them something better than that.

And let no one paint ideas like this as callous.

Think about it: with your children, would you dream of just leaving them to their own devices, not getting a job, not training, nothing?  

No – you’d nag and push and guide and do anything to get them on their way… and so must we.

So this is what we want to see: everyone under 25 – earning or learning.’  (Cameron, 2013)

Nonetheless,  it is widely reported that the intention is to remove Housing Benefit from those aged under 25 years. For example, the BBC reports:

A Conservative source has told the BBC the manifesto will definitely contain a
commitment to end the automatic entitlement to housing benefit for the
under-25s, as suggested previously by Mr Cameron.

This re-announcement does not make sense in terms of the Party’s stated aims.  First, it wants to reduce worklessness, it wants young people in employment or education.  Yet geographically the job market has hot and cold spots.  If young people in an area of high unemployment want paid work they might wish to move to areas where there are jobs.  This proposal would make this very difficult as entry level jobs for the young tend to be low paying.  Put simply, Cameron’s policy would stop some youngsters gaining work by restricting them to jobs within commuting distance of their parents/guardians home, but there may be a lack of employment opportunities locally.

Secondly, the Party wants to be business friendly.  Yet a measure that reduced job mobility penalises employers – the pool of young people to recruit from is smaller.  Where the job market is buoyant, employers may have to pay higher wages as young people can no longer afford to move to such areas and compete for work.

Thirdly, the Party believes that employment is meant to pay – hard working youngsters should be better off in work than on the dole.  Yet the low wages associated with entry level jobs mean that under 25s will find it difficult to be better off in employment without support to cover their housing costs.

The proposal is irrational in terms of the Conservatives Party’s stated ambitions.  This then raises the question of why (repeatedly) make the proposal?  The simplest explanation is that it is for party political/ideological reasons.  There is no strong interest group representing young people, politically they are an easy target.  So-called ‘tough decisions’ would involve tackling the causes of the high cost of Housing Benefit – the lack of affordable rented accommodation.  Now addressing that, would have made sense!

In a major speech on welfare reform, the Prime Minister outlined a number of welfare reforms.  The one reform that has received widespread publicity is that to abolish Housing Benefit for those aged under 25 years.  The justification given is that as a group they do not require the ‘safety net’ of the welfare state because either they have ‘other means of support’ or have not fallen on ‘hard times’.  For the under 25s the implication is that their families should support them.

 

However, there are a number of reasons, even if you support the contentious notion that the main purpose of the benefit system was to act as a safety net, why removing Housing Benefit from this group would be counterproductive.

 

Firstly, and this seems to have escaped some of those commenting on the proposal, Housing Benefit is paid to people in-work and out-of-work.  It is designed to help those on low incomes meet the cost of rented accommodation, and so is paid to those in and out of employment, as well as to those no longer active in the labour market.  Thus a proportion of the 385,010 under 25s in receipt of Housing Benefit (as at March 2012 according to official figures) would have been in paid work.  The published figures do not say how many were in employment, but it is possible to make a rough estimate.  Official figures show that 17.6% of all Housing Benefit recipients are in paid work.  If this was true of the under 25s this would mean 67,671 were in employment, and under Cameron’s proposal would lose entitlement to benefit, despite doing what was the Government wants them to do – have a job.  It might be objected that it is unreasonable to apply this percentage to this age group, after all youth unemployment is very high.  However, even if the proportion is halved it still removes from benefit around 34,000 young people in work with no support for their housing costs.

 

Secondly, it would undermine the Government’s attempt to tackle child poverty.  Of those under 25s in receipt Housing Benefit, a majority (53%) have children.  Removal of Housing Benefit from these families would increase their risk of child poverty.

 

Thirdly, the Government would like unemployed young people in areas of high unemployment to move to locations where there are jobs.  But this proposal would reduce geographical mobility.  Without Housing Benefit young people would have a less of an incentive to go where the jobs are.

 

Fourthly, the Government are replacing a number of means-tested benefits, including Housing Benefit, with Universal Credit.  One of the claimed benefits of this reform is simplification of the benefit system.  Simplification is a worthy objective – it can mean lower administrative costs, a public who are clearer about their entitlement (and hence higher take up rates) and less benefit fraud and error.  Yet even before Universal Credit is introduced some of these simplification gains are being given up.

 

Finally, and as acknowledged by Cameron, there are some young people who are estranged from their parents/guardians and who should not be expected to live with them.  However, he does not seem to appreciate the complexity of some young people’s family lives, or the administrative burden (and complexity) applying these ‘exceptions’ to his policy.

 

What didn’t get covered!

What is also interesting about the immediate media coverage of Cameron’s speech is a proposal that did not attract, as far as I can tell, any media attention.  He comments favourably on the use of time limits to benefit entitlement in the US.  He does not propose ‘US-style time-limits’, but ‘we could perhaps revise the level of benefits people receive if they are out of work for literally years on end.’  A policy he refers to as ‘softer time-limits’.  The media omission is important, because if enacted this would affect significantly more than the 385,010 young people in receipt of Housing Benefit.  Cameron points out that there are 1.4m people in the UK who have been out of employment for at least 9 of the last 10 years.

 

 

There have been claim and counterclaim about whether the number of people in employment in the UK has risen or fallen since the General Election in May 2010.  The debate is usually in terms of number of jobs, but any comparisons are made difficult by some people working full-time, others part-time and by some people having more than one job.  A more revealing approach is to look at actual hours worked.  Here the news is less good for the prime minister.

Total weekly hours worked in May-July 2010 (which cover the election) were 921.3m, and in Sept-Nov 2011 (the most recent figure) were slightly lower at 916.3m, a fall of 0.5 per cent.  So whilst the numbers do go up and down over time, the labour market appears to be more or less where it was when Cameron came to power.  Not quite what was promised!

The ONS data going back to the beginning of the recession are graphed in this spreadsheet:  Hours worked chart jan 2012.xls