The welfare cap is due to be breached

The ‘welfare cap’ was another wizard wheeze from the government that George Osborne hoped would embarrass opponents in the future.  The idea was to limit total spending on some benefits to a set figure, so that if the cap was exceeded, the government would then have to explain why.  There has just been a debate on the welfare cap, and (despite a particularly well-informed contribution from Ian Blackford of the SNP) it has said nothing much.  The motion approved in the House was this:

“this House agrees that the breach of the Welfare Cap in 2019-20 and 2020-21, due to higher forecast inflation and spend on disability benefits, is justified and that no further debate will be required in relation to this specific breach”.

There are good reasons, however, why expenditure on benefits should on occasions go up.  The main one is that many benefits are designed to go up when people’s incomes go down.  It’s also intriguing to note that the government is now expecting to spend more on disability benefits, when it initially claimed that PIP was going to save money (and fined Northern Ireland on that basis).

There is, of course, a simple way to make sure that the cap is not breached, and that would be to increase the level of anticipated expenditure to a more realistic figure.  But it’s far from clear that the global figure is telling us very much about what governments are doing.  Most benefits aren’t really ‘spent’ – they’re transfer payments, moving money from one person to another – and precious little work has been done to see if the global extent of transfers really has much impact on the broader economy.   It’s much more important what effects the benefits have on people’s lives.  In evidence to the Treasury committee yesterday , Chancellor Philip Hammond was refreshingly candid about the fact that he’d cut the living standards of people on low pay, and said directly that it was something the government had intended.

“We were elected on a manifesto that included the commitment to reduce welfare spend, particularly the spending of welfare on in-work benefits … self-evidently, the preponderance of people receiving in-work benefits will be in the lower income deciles. … At the heart of this is the decision to reduce spending on working-age welfare.” (16.21-22)

Leave a Reply