150423 The welfare pie
  • The welfare pie. String out the bunting: this is the first pie chart in our 28-post-strong To The Point series. It shows the government’s total spending on benefits and tax credits, and on whom that spending is, well, spent. The categories are borrowed from page 8 of this IFS report, but I’ve updated them for this current financial year by sifting through the latest DWP figures. Pensions count under “Older people”; Housing Benefit counts under “For people on low incomes”; and so on. It’s not perfect – the latest Working Tax Credit statistics are for 2013-14, for example – but it’s close enough.
  • That thin slice. Whenever welfare spending is set out like this, the amount that’s spent on unemployment benefits always stands out. Not because it’s a lot, but because it’s relatively little; certainly less than the newspaper inches would have you believe. The amount that’s forecast to go specifically towards unemployed people this year, and mostly on their Jobseeker’s Allowance, is £2.4 billion. That’s almost 50 per cent lower than it was at the start of this Parliament, even after inflation is accounted for: a testament to the jobs boom but also to some other effects, one of which I’ll mention below.
  • That massive chunk. Benefits for older people, from pensions to the Winter Fuel Allowance, are the biggest slice of the pie, natch. They’re expected to account for 47 per cent of all spending this year, which is three percentage points higher than their share five years ago. It’s even higher when you consider the benefits that pensioners are entitled to from other categories, such as those for sick and disabled people. But I’ve already covered that in a previous To The Point post, so won’t labour the point here. Suffice to say that an ageing population will tend to put upwards pressure on spending, as will a government who gives them all the breaks.
  • And in between. Aside from spending on older people, only one other category has grown over this Parliament: that for sick and disabled people. It’s now 19 per cent higher, in real terms, than it was in 2010-11. And much of that is due to more people claiming the Employment and Support Allowance. This payment was basically intended to replace Incapacity Benefit, but instead it’s dwarfed it. The combined spending on the two benefits was around £8.4 billion at the start of this Parliament. Now it’s closer to £13.8 billion. Leaked Whitehall memos put this down to claimants moving across from Jobseeker’s Allowance. They also suggested that this is “one of the largest fiscal risks currently facing the Government”.
  • What’s left to cut? Even against total welfare spending of around £211 billion, George Osborne’s plan for an extra £12 billion of cuts is not insignificant. The problem is that, to date, the spending reductions have come from some groups more than others. Can the Chancellor carry on that way? Or will he have to sweep his scythe across a wider area, including pensions and Housing Benefit and ESA, if he is to meet his aims? No wonder he’s avoided answering that question during this election campaign.

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