Capping welfare

Document type
Paper
Author(s)
Oakley, Matthew
Publisher
Policy Exchange
Date of publication
25 June 2013
Subject(s)
Social Policy, Poverty Alleviation Welfare Benefits and Financial Inclusion
Collection
Social welfare
Material type
Reports

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Britain already has one cap on benefits but between now and 2015 it is likely the discussion will focus on an additional cap to be in place to attempt to manage welfare spending. This paper argues that post 2015, cutting Winter Fuel Payments or TV licences for pensioners is ‘simply tinkering around the edges’. Cuts to these pensioner perks would save at most £3 billion even if there were completely removed. In contrast, the State pension costs are set to rise by some £40 billion in today’s terms the next 50 years. This would mean younger generations saddled with enormous financial burdens.

Annual Managed Expenditure makes up 50.8% of government expenditure - £379billion for 2013/14. This is set to rise to 56% by 2017/18. The main components are benefits (working age and pensioner), tax credits and debt interest payments. This composition means that, in contrast to Departmental Expenditure Limits (DELs), it is the part of government expenditure that is harder to predict because it is determined by a range of factors outside any department’s direct control. This paper argues that AME should be capped so that tax revenues are available for spending on wider public services, such as health, education and defence.

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