Archives for the month of: March, 2015

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by giving unemployed 18- to 21-year-olds six months to find work or training before their Jobseekers’ Allowance is withdrawn.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

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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