Real terms benefits spending will be almost the same in 2015/16 as it was when the Tory-led coalition came to office, according to a new analysis of the Government’s record on welfare reform.
A damning new report from the Institute for Fiscal Studies (IFS) reveals that benefits spending is forecast to be £220 billion in 2015-16, almost exactly the same as in 2010-11.
An ageing population, weak wage growth and rising private rents are pushing up benefits spending, resulting in lower savings than the Government promised.
Some of the biggest changes to the welfare system, such as Iain Duncan Smith’s flagship Universal Credit and the introduction of Personal Independence Payments for disabled people, have been dogged by delays and additional costs.
However, the IFS also says welfare reforms introduced over the course of this parliament mean spending is £16.7 billion lower than it would otherwise have been.
The benefit cap has been broadly welcomed by the majority of voters, probably because it only affects a relatively small number of people (27,000), but only saves taxpayers £650 million. David Cameron’s pledge to lower the cap from £26,000 to £23,000 would only save a further £150 million, says the IFS.
Linking the uprating of benefits to CPI, rather than the more generous RPI inflation measure, and cuts to working tax credit are forecast to save a further £4.7 billion in 2015–16.
Other reductions in the value of tax credits and removing child benefit from higher earners will reduce spending by £1.9 billion.
According to the report. working age benefits are rising less quickly than both earnings and prices, which the IFS says “does not seem a sustainable long term policy”.
Social tenants make up 60% of housing benefit expenditure, but cuts in the support available to tenants in the private sector are ‘substantially larger’, says the IFS. This is despite the highly controversial and widely hated ‘bedroom tax’.
Despite all these cuts in benefits spending the Government has failed to deliver the welfare “revolution” it promised. Middle-income families with children and pensioners remain better-off than they were under Labour, while those on low-incomes face further benefit cuts. IFS says low-income working age adults without children did not gain under Labour’s benefit reforms.
The IFS describes the Government’s welfare reforms and more of an evolution than a revolution. Delays in the roll-out of Universal Credit mean it’s unlikely to be fully completed until April 2020 at the earliest, leaving the next Government to pick up the pieces (if they stick with it).
Changes to disability benefits have also been slower than originally planned. Inaccurate assessments for Employment and Support Allowance, and delays in introducing Personal Independence Payments (PIP) have resulted in much lower savings. In the case of PIP, the Government has saved £1 billion less than intended.
The IFS says the next Government will face a difficult decision on whether to make further cuts to welfare spending – not so difficult for the Conservatives it would seem – but identifying where to cut “will be a challenge, especially if pensioners continue to be protected.
Rachel Reeves MP, Labour’s Shadow Work and Pensions Secretary, said:
“For all David Cameron’s claims to cut welfare, this new research reveals that benefit spending will be no lower next year than it was when David Cameron took office –despite measures such as the cruel and unfair Bedroom Tax. The IFS confirms that you can’t control welfare spending without tackling its root causes in low pay and rising rents.
“Only Labour has a plan to tackle the cost-of-living crisis and low pay as part of our tough but balanced plan to get the deficit down, control welfare spending and earn our way to higher living standards for all, not just a few at the top.
“A Labour government will raise the National Minimum Wage to £8 an hour, bring in Make Work Pay contracts to ensure more people are paid a Living Wage, get more homes built and extend free childcare provision and will get the next generation into work with a Compulsory Jobs Guarantee.”