Welfare cap

Last updated

The welfare cap is a self-imposed limit on the amount that the government of the United Kingdom can spend on certain social security benefits and tax credits. The welfare cap was first introduced in the 2014 United Kingdom budget. [1] The policy took effect in 2015, and the limit for the financial year 2015–2016 was set at £119.5 billion, [2] amounting to 56% of total welfare spending. [1]

Contents

The operation of welfare cap is set out in The Charter for Budget Responsibility. The Office for Budget Responsibility (OBR) is required to report periodically on whether the cap has been met or exceeded. The OBR initially made its assessments annually in the Autumn, but since 2017 the cap is only assessed at the first Budget of a new Parliament. Welfare spending was initially required to be less than the cap every year, but since 2017 this has been replaced by a medium-term welfare cap and welfare spending is assessed for a single year chosen by HM Treasury. Following the 2017 general election the OBR made its Autumn 2017 assessment for the financial year 2021–22. The 2019 general election led to a subsequent assessment at the March 2020 budget for the financial year 2024–25 [3] with the cap set at £135.4 billion for that year. [4]

In January 2022 the House of Commons approved a change to the welfare cap allowing it to qualify as one of the "fiscally neutral classification changes" which do not require approval from Parliament. [4]

The policy was a facet of the Coalition government's wide-reaching welfare reform agenda which included the introduction of Universal Credit and reforms of housing benefit and disability benefits.

Implementation

In accordance with the 2014 Budget the welfare cap was set at £119.5 billion in 2015/16 and increased to £126.7 billion in 2018/19. [5] However, Housing Benefit and Jobseeker's Allowance are not included in the overall cap on welfare spending. In June 2014, leaked internal documents suggested that the Coalition government could breach its own welfare spending cap. [6] This was confirmed in the 2015 Spending Review.

The OBR judged that the welfare cap was being breached in its 2015 and 2016 assessments, requiring a Government minister to justify the excess spending to the House of Commons on both occasions. [3] Forecasts for 2017–18 and 2018–19 both indicated significant expenditure on social security outside the cap. [7]

Positions of political parties

The welfare cap was supported by nearly all Members of Parliament, passing by 520–22. [8] During the vote on the 2014 United Kingdom budget that introduced the welfare cap, the policy was supported by the Labour shadow cabinet but thirteen Labour MPs opposed it, including future party Leader Jeremy Corbyn, future Deputy Leader Tom Watson, future Shadow Chancellor John McDonnell and future Shadow Home Secretary Diane Abbott. [2]

Criticism

In 2014 Chris Goulden of the Joseph Rowntree Foundation criticised the way in which the welfare cap was more likely to include benefits claimed by the poorest in society:

"there is more spending that is not in the welfare cap (albeit virtually all state pension) than is within the cap. Overall, 30% of spending from within the welfare cap is on the richest half of society but 40% of the protected spend". [9]

Also in 2014 Faiza Shaheen of the New Economics Foundation think-tank argued that the welfare cap appeared to be the result of ideology rather than an aim to tackle the underlying causes of welfare dependency. [10]

See also

Related Research Articles

<span class="mw-page-title-main">Welfare state in the United Kingdom</span> Welfare Programs in the United Kingdom

The welfare state of the United Kingdom began to evolve in the 1900s and early 1910s, and comprises expenditures by the government of the United Kingdom of Great Britain and Northern Ireland intended to improve health, education, employment and social security. The British system has been classified as a liberal welfare state system.

<span class="mw-page-title-main">Yvette Cooper</span> Shadow Home Secretary

Yvette Cooper is a British politician serving as Shadow Home Secretary under Keir Starmer since 2021, having also served in the position under Ed Miliband from 2011 to 2015. She previously served in Gordon Brown's Cabinet as Chief Secretary to the Treasury from 2008 to 2009 and Work and Pensions Secretary from 2009 to 2010. A member of the Labour Party, she has been Member of Parliament (MP) for Normanton, Pontefract and Castleford, previously Pontefract and Castleford, since 1997.

<span class="mw-page-title-main">John Healey (politician)</span> British politician (born 1960)

John Healey is a British politician who has served as the Member of Parliament (MP) for Wentworth and Dearne, formerly Wentworth, since 1997. A member of the Labour Party, he has been Shadow Secretary of State for Defence since 2020.

<span class="mw-page-title-main">Department for Work and Pensions</span> Ministerial department of the UK Government

The Department for Work and Pensions (DWP) is a United Kingdom government department of His Majesty's Government responsible for welfare, pensions and child maintenance policy. As the UK's biggest public service department it administers the State Pension and a range of working age, disability and ill health benefits to around 20 million claimants and customers. It is the second largest governmental department in terms of employees, and the largest in terms of expenditure (£187bn).

<span class="mw-page-title-main">Danny Alexander</span> British banker and former Liberal Democrat politician

Sir Daniel Grian Alexander is a former politician who was Chief Secretary to the Treasury between 2010 and 2015. He was the Member of Parliament (MP) for the Inverness, Nairn, Badenoch & Strathspey constituency from 2005 until the general election in May 2015. In his first parliamentary term (2005–2010), Alexander was the Liberal Democrat spokesperson for Work and Pensions (2007–2008), the Chief of Staff to party leader Nick Clegg, and Chair of the Liberal Democrat Manifesto Group (2007–2010).

<span class="mw-page-title-main">Helen Goodman</span> Former British Labour politician

Helen Catherine Goodman is a British former politician who served as Member of Parliament for Bishop Auckland from 2005 to 2019. A member of the Labour Party, she was Deputy Leader of the House of Commons from 2007 to 2008 and a Parliamentary Under-Secretary of State for Work and Pensions from 2009 to 2010. She also served in government as an Assistant Whip from 2008 to 2009.

<span class="mw-page-title-main">Stephen Crabb</span> British politician

Stephen Crabb is a British politician who has served as the Member of Parliament (MP) for Preseli Pembrokeshire since 2005 and Chairman of the Welsh Affairs Select Committee since 2020. A member of the Welsh Conservatives, he served as Secretary of State for Work and Pensions from March to July 2016 under Prime Minister David Cameron. Crabb had previously been appointed a government whip, Parliamentary Under-Secretary of State for Wales (2012–2014) and Secretary of State for Wales (2014–2016) under Cameron.

Employment and Support Allowance (ESA) is a United Kingdom welfare payment for adults younger than the State Pension age who are having difficulty finding work because of their long-term medical condition or a disability. It is a basic income-replacement benefit paid in lieu of wages. It is currently being phased out and replaced with Universal Credit for claimants on low incomes, although the contribution-based element remains available.

Full fiscal autonomy (FFA) – also known as devolution max, devo-max, or fiscal federalism – is a particular form of far-reaching devolution proposed for Scotland and for Wales. The term has come to describe a constitutional arrangement in which instead of receiving a block grant from the UK Exchequer as at present, the Scottish Parliament or the Senedd would receive all taxation levied in Scotland or Wales; it would be responsible for most spending in Scotland or Wales but make payments to the UK government to cover Scotland or Wales's share of the cost of providing certain UK-wide services, largely defence and foreign relations. Scottish/Welsh fiscal autonomy – stopping short of full political independence – is usually promoted by advocates of a federal United Kingdom.

<span class="mw-page-title-main">David Freud, Baron Freud</span> British politician, life peer, and former investment banker (born 1950)

David Anthony Freud, Baron Freud, is a British politician, life peer, and former investment banker who served as Minister for Welfare Reform from 2010 to 2016. Before he joined the Conservative Party, he was vice-chairman of investment banking at UBS and a government adviser on welfare reform.

<span class="mw-page-title-main">Conservative–Liberal Democrat coalition agreement</span> 2010 political agreement in the United Kingdom

The Conservative–Liberal Democrat coalition agreement was a policy document drawn up following the 2010 general election in the United Kingdom. It formed the terms of reference governing the Cameron–Clegg coalition, the coalition government comprising MPs from the Conservative Party and the Liberal Democrats.

<span class="mw-page-title-main">Office for Budget Responsibility</span>

The Office for Budget Responsibility (OBR) is a non-departmental public body funded by the UK Treasury, that the UK government established to provide independent economic forecasts and independent analysis of the public finances. It was formally created in May 2010 following the general election and was placed on a statutory footing by the Budget Responsibility and National Audit Act 2011. It is one of a growing number of official independent fiscal watchdogs around the world.

<span class="mw-page-title-main">June 2010 United Kingdom budget</span>

The June 2010 United Kingdom Budget, officially also known as Responsibility, freedom, fairness: a five-year plan to re-build the economy, was delivered by George Osborne, Chancellor of the Exchequer, to the House of Commons in his budget speech that commenced at 12.33pm on Tuesday, 22 June 2010. It was the first budget of the Conservative-Liberal Democrat coalition formed after the general election of May 2010. The government dubbed it an "emergency budget", and stated that its purpose was to reduce the national debt accumulated under the Labour government.

<span class="mw-page-title-main">United Kingdom government austerity programme</span> Fiscal policy

The United Kingdom government austerity programme is a fiscal policy that was adopted for a period in the early 21st century following the Great Recession. The term was used by the Coalition and Conservative governments in office from 2010 to 2019, and again during the 2021–present cost of living crisis. The two periods are separated by a stint of interventionist, Keynesian spending during the COVID-19 pandemic.

<span class="mw-page-title-main">2012 United Kingdom budget</span>

The 2012 United Kingdom budget was delivered by George Osborne, the Chancellor of the Exchequer, to the House of Commons on Wednesday 21 March 2012.

<span class="mw-page-title-main">Welfare Reform Act 2012</span> United Kingdom legislation

The Welfare Reform Act 2012 is an Act of Parliament in the United Kingdom which makes changes to the rules concerning a number of benefits offered within the British social security system. It was enacted by the Parliament of the United Kingdom on 8 March 2012.

<span class="mw-page-title-main">Melanie Onn</span> British Labour politician

Melanie Onn is a British former politician who served as Member of Parliament (MP) for Great Grimsby from 2015 to 2019. A member of the Labour Party, she previously served as Shadow Deputy Leader of the House of Commons from September 2015 to June 2016 and Shadow Minister for Housing from July 2017 to March 2019. At the 2019 general election, she lost the seat to the Conservative candidate Lia Nici-Townend.

<span class="mw-page-title-main">Welfare Reform and Work Act 2016</span> United Kingdom legislation

The Welfare Reform and Work Act 2016 is an Act of the Parliament of the United Kingdom. It was introduced into the House of Commons on 9 July 2015 by Iain Duncan Smith and received Royal assent in March 2016.

The benefit cap is a UK welfare policy that limits the amount in state benefits that an individual household can claim per year. It was introduced by the Cameron–Clegg coalition government in 2013 as part of the coalition government's wide-reaching welfare reform agenda which included the introduction of Universal Credit and reforms of housing benefit and disability benefits. The government cited wide public support for the measure, despite it being highly controversial. The benefit cap primarily affects families with children, high rents, or both.

<span class="mw-page-title-main">European Union (Notification of Withdrawal) Act 2017</span> United Kingdom legislation

The European Union Act 2017 was an Act of the Parliament of the United Kingdom to empower the Prime Minister to give to the Council of the European Union the formal notice – required by Article 50 of the Treaty on European Union – for starting negotiations for the United Kingdom's withdrawal from the European Union. It was passed following the result of the 2016 United Kingdom European Union membership referendum held on 23 June in which 51.9% of voters voted to leave the European Union.

References

  1. 1 2 The welfare cap (Report). House of Commons Library briefing paper. 2 March 2017.
  2. 1 2 George Eaton (6 March 2014). "Labour welfare cap rebels: the full list". New Statesman.
  3. 1 2 Keep, Matthew (16 June 2020). "The welfare cap". House of Commons Library.
  4. 1 2 "Research Briefing: The welfare cap". House of Commons Library. UK Parliament. 24 March 2023.
  5. ↑ "Labour MPs should oppose the welfare cap – here's why | James Bloodworth | Opinion | The Guardian". theguardian.com. Retrieved 24 March 2017.
  6. ↑ "Government 'could breach its own welfare spending cap'". BBC News. 20 June 2014.
  7. ↑ "Guidance: Benefit expenditure and caseload tables". Department for Work and Pensions. 21 November 2018.
  8. ↑ "MPs approve annual welfare cap in Commons vote". BBC News. 26 March 2014.
  9. ↑ James Bloodworth (26 March 2014). "Labour MPs should oppose the welfare cap – here's why". The Guardian.
  10. ↑ Phillip Inman (19 March 2014). "Spending cap won't tackle causes of welfare dependency, say critics". The Guardian.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.