The Benefit System, Welfare to Work

Comprehensive Spending Review caps welfare spending

Comprehensive Spending Review caps welfare spending

 The Spending Review has led to many changes to welfare. Pensioners living in certain EU countries may lose Winter Fuel Allowance under the new ‘temperature test’. Job Seekers Allowance will have new conditions (such as a seven day wait before being able to claim and English language classes for those who do not speak English fluently). However, the policy that has featured most prominently in the media has been the proposal to ‘cap’ the welfare budget[1].

This blog has previously looked at a speech by the Labour leader, Ed Miliband, in which he suggested a number of welfare reforms, including capping the budget over three year periods (here). In the Spending Review earlier this week, the coalition government has adopted a similar policy.

The government has proposed that from April 2015, there should be a cap on elements of welfare spending. The cap would last for four year periods and would be a freeze in cash terms rather than real terms (in real terms it would be adjusted for inflation each year).

The government has claimed that a cap is necessary due to the rise in welfare spending before the recession (more than 50% in real terms). The new cap will not include the state pension and elements of welfare spending that adjust when unemployment increases and falls (‘automatic stabalisers’). However, elements such as tax credits, disability benefits and pensioner benefits (such as the Winter Fuel Allowance and free TV licenses) will be included. A government would be allowed to breach the cap but would have to explain to Parliament[1].

The Shadow Chancellor, Ed Balls, has indicated that he agrees with the welfare cap and has gone on to say that over the next 20 to 30 years pension spending will also have to be included in the cap[2]. The Confederation of British Industry also praised the cap and the Institute of Directors agreed with Ed Balls that the cap should be widened to include pensions[3]. It also received a positive reception in right wing media, such as the Daily Telegraph, which credited Osborne with shifting the political centre[4].

Alison Garnham, Chief Executive of Child Poverty Action Group claimed that the cap risked increasing child poverty and encouraged the Chancellor to look at the causes of certain areas of welfare spending increasing (ageing population, low pay, rising housing costs and childcare costs)[5]. Gillian Guy, Chief Executive of Citizens Advice, claimed that the ‘artificial’ cap was ‘a gamble’[6]. It also received a negative reception in left wing media, such as the Guardian, whose editorial called on Ed Miliband to reject specific parts of the ‘mean spirited’ policy[7].


  • Will a cap on non-cyclical welfare spending reduce the rise in welfare spending? Is this a good thing?
  • Is it right to exclude benefits such as the state pension and Job Seekers Allowance from the cap? Should other benefits be excluded?

By Will Archdeacon

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1 Comment

  1. The Comprehensive spending review comes without surprise.Who will this hit the hardest…….Yes, once again the effects will be for those on a pension.  Unproductive people who appear to be living longer.  Pensionable age is set to rise and could eventually soar to Seventy.  This would reduce spending and many by this age will be dead.   I have another suggestion to make……….The proposed tariff of a hundred pounds for migrants coming to the UK is very low and could be increased to reduce economic migration.  A refundable bond of five thousand pounds would reduce the number. Set to rise by another huge increase in January 2014.  Our tiny Island has become a target and is bursting at the seams.  Institutions like the NHS are failing to provide the care everyone expect through the huge extra demands placed upon it. If no remedial action is taken, Institutions like the NHS will grind to a halt and implode. We will become like the good old USA, where without the appropriate Insurance you will not be treated.   Another additional provision for new arrivals should include a firm written promise of employment, or a departure date to leave the country.  The harsh reality shows that something has to happen………The Think Tank need to broaden the scope or face the consequences!  This is my review ! Best Regards…. Brian Mckay.

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