Osborne sets £119bn welfare cap
THE CAP on welfare spending, first proposed by the coalition government in June 2013, will be set at £119.5bn for 2014-15, the chancellor announced in his Budget statement yesterday.
The cap will include 26 different benefits and payments but will exclude Jobseeker’s Allowance and its associated benefits, the state pension and a few smaller specific credits.
The excluded benefits will cost the country £100bn a year, the Treasury confirmed last night; meaning the cap covers just over half of all welfare spending by the government.
The cap will prevent current and future governments from increasing welfare budgets unless they call a vote in the House of Commons or find an alternative way to fund policy changes. It will rise in line with inflation, reaching £127bn in 2018-19.
“Britain should always be proud of having a welfare system that helps those most in need,” the chancellor said in his statement yesterday. “But never again should we allow its costs to spiral out of control and its incentives to become so distorted that it pays not to work.”
Labour’s shadow chancellor Ed Balls said his party would vote to support the welfare cap when it comes before the House of Commons next week.
He added that Labour would also exclude pensions from the cap, which account for most of the excluded £100bn, but would include other pensioner benefits.
If overall spending on welfare – including child benefit, income support and housing benefit – rises above a two per cent margin, ministers must seek the approval of parliament for changes. The highly political policy seeks to win back the trust of voters and prevent costs spiralling out of control.
In addition to his announcement on the welfare cap, Osborne also revealed that cuts to government departmental spending would continue, with a £1bn commitment to reducing costs made permanent beyond 2015-16.
Public service pensions will also be reformed, with government departments asked to stump up more cash to cover rising costs.
Earlier this month the government also announced plans to increase the national minimum wage by 19p per hour to £6.50 in October this year. The chancellor accepted a recommendation from the Low Pay Commission that the wage should rise by three per cent, benefitting a million workers.