Andrew Hood

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
But work allowances have been pre-emptively cut three times
Now 6% lower in real terms than when first finalised
© Institute for Fiscal Studies
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