By Richard Johnstone | 26 June 2013
Welfare spending is to be capped to control the overall cost of the benefit bill from April 2015, Chancellor George Osborne announced in the Spending Review.
Osborne said that he would introduce a cap across a four-year period from 2015/16, which would be then updated at subsequent Budget statements.
The limit will be set in cash terms, and would include an allocation for inflation.
Benefits worth more than £100bn will be included in the cap, although a full list has not been published. The Spending Review document stated that the basic and additional state pension would be excluded, as would Jobseeker’s Allowance and other ‘counter-cyclical’ welfare payments.
However, all other social security and tax credits expenditure would be included, Osborne said. Among the payments that could be incorporated are Child Benefit and Housing Benefit, which are being merged into the government’s Universal Credit scheme by 2017.
The chancellor said the welfare budget, which forms part of the Annually Managed Expenditure element of government spending, had been left unmanaged by the previous Labour administration. He said the cost had increased by 50% in their time in office even before the recession started in 2008.
In future, when a government looks set to breach the cap due to higher-than-expected increases in welfare payments, the Office for Budget Responsibility will issue a public warning. Ministers will then be forced to take action to cut welfare costs or publicly breach the cap, Osborne said.
This would act as ‘a limit on the nation’s credit card’, and is ‘fundamentally fair’ as the government reduces borrowing, he added.
‘The new welfare cap is proof that Britain is serious about living within its means.’
As part of moves to cut the Department for Work and Pensions budget by 9.5% in 2015/16, a new ‘contract’ with people on benefits will be introduced to save more than £350m a year, he added.
This will include a so-called ‘upfront work search’, with people required to prepare a CV and start looking for work before they qualify for out-of-work benefits. A new seven-day wait period after people are made unemployed will also be put in place. ‘Those first few days should be spent looking for work, not looking to sign on,’ Osborne said.
‘We’re doing these things because we know they help people stay off benefits and help those on benefits get back into work faster.’
Claimants who don’t speak English will be required to attend language courses if they want to keep receiving support, he added.
