Capping benefits: the Autumn Statement

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.

2 comments

  1. AHS : LEPU Journal

    Paul,

    Won’t it only be contribution-based JSA that will be protected ? They’re the ‘automatic stabilisers’ of finance ministry parlance. The assumption will be that people who don’t get back into work before the contributory element runs out deserve to be clobbered.

    Andrew Jones

    • Paul Spicker

      You may well be right, Andrew, but what the statement actually says is this: “1.102 To allow the automatic stabilisers to operate, the cap will not apply to the most cyclical elements of welfare: JSA and JSA-passported Housing Benefit expenditure and, following the introduction of Universal Credit, to jobseekers within the Full Conditionality group of Universal Credit with no net earnings.” Making sense of this sort of thing is getting to be like Kremlinology: we have to rely on signs and portents because the official statements are so opaque.

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