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by giving unemployed 18- to 21-year-olds six months to find work or training before their Jobseekers’ Allowance is withdrawn.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


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.

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.