Benefit Cap Update – 2014

MPs have overwhelmingly backed plans to introduce an overall cap on the amount the UK spends on welfare each year.

The cap formed part of Chancellor George Osborne’s recent Budget statement to the House. Welfare spending, excluding the state pension and some unemployment benefits, will be capped next year at £119.5 billion.

The Chancellor would, in future, set welfare spending limits at the beginning of each Parliament. If those spending limits are exceeded, the Chancellor will be held to account by Parliament.

The proposed cap has received cross-party support, save for a rump of Labour rebels who voted against the cap.

The cap will include spending on the vast majority of benefits, including Pension Credits, Severe Disablement Allowance, Incapacity Benefit, Child Benefit, both Maternity and Paternity pay, Universal Credit and Housing Benefit. However, Jobseeker’s Allowance and the State Pension will be excluded.

Under the proposed system, if a Government wanted to spend more on one area of the welfare state, it would have to compensate by making cuts elsewhere, to stay within the overall cap.

If the limit is breached – or going to be breached – ministers would have to explain why to Parliament and get the approval of MPs in a vote.

At best, this is a freeze in benefits for those feeling the sharp end of welfare reform. Many part-time workers will find their benefits decreasing in real terms, for example. Cross-party support for this cap is a sure sign that whoever is in power after the next Election, benefit restrictions will continue to impact on the most vulnerable for the foreseeable future.