It may be some time before the main effect of today’s Autumn Statement becomes apparent. The Chancellor has announced a cap on the total expenditure that can be made for benefits. The cap “will apply to all social security and personal tax credits expenditure for the UK, with specific exceptions for the basic and additional State Pension and the most cyclical elements of welfare.”
When the cap is exceeded, governments will have to report it to Parliament. Possibly the intention is to make the control of finance more like the process in the USA – but after this year’s performance in Washington, it’s a mystery why anyone would want that.
The process apart, the main question that bears thinking about is what effect a cap would have, if it operated as intended. Excluding the state pension and Jobseekers Allowance means that it has to apply mainly to Housing Benefits, benefits for disability, Child Benefit and Tax Credits. The first two categories benefit pensioners as well as people of working age; and all four categories go to people in work as well as people who are out of work. That seems to imply that an effective cap would reduce benefits for people on low incomes. Because those who are out of work on JSA would be protected, the main adverse effect would be felt by pensioners, people with disabilities and people in work.
I don’t see this as being a particularly plausible set of options. It’s rather more likely that the benefits that would be squeezed would the ones that are deemed to go to those who are ‘better off’ – the contributory and non-means tested elements. The purpose may then be to drive benefits down to a residual core, providing at most a minimum income.