Response to Andy King, OBR
Andrew Hood
© Institute for Fiscal Studies
Further cuts to welfare spending?
• Current government has announced cuts intended to reduce
welfare spending by £19bn a year relative to no policy change
– although not all have been fully implemented/saved what was hoped
• £21bn of tax rises/further welfare cuts needed to keep to
borrowing plans without accelerating departmental cuts
– could of course choose to borrow more
• Would pensioners be broadly protected again?
– in 2010–11, 37p in every £ of welfare spending on state pensions,
another 15p on other pensioner benefits
– by 2015–16, 42p in every £ of welfare spending on state pensions,
another 14p on other pensioner benefits
© Institute for Fiscal Studies
Suggested cuts
• Mr Osborne has suggested a future Conservative government
would look to reduce welfare spending by a further £12bn a year:
– Freeze most working-age benefits for two years (about £2½ bn)
– Lower household benefit cap to £23,000 (£200m)
– Removing housing benefit for some under-22s (£250m-400m)
– Removing tax credits from migrants for the first four years
• Labour party have also suggested a number of future cuts...
– 2 years of 1% nominal increases in child benefit (£400m)
– Removing winter fuel payment from higher-rate taxpayers (£100m)
– Further restrictions on benefit eligibility of migrants
• and a giveaway...
– Reverse “bedroom tax”/ “spare room subsidy” (-£400m)
© Institute for Fiscal Studies
Universal credit
• Has the potential to deliver two major benefits
1. Simplicity and increased take-up
–
Could have significant impact on child poverty
–
Eg. if anyone who takes up a legacy benefit takes up UC, then UC
reduces relative child poverty by 400,000 in 2020
2. Reduce the number of people facing the weakest work
incentives
–
But work allowances have been pre-emptively cut three times
–
Now 6% lower in real terms than when first finalised
© Institute for Fiscal Studies