The General Election campaign and the now post GE period has seen a kerfuffle of the £12 billion of stated cuts in welfare – that crass Americanism now invariably used for social security – and we need to look at what has been actually said and not at what 99.99% assume has been said.
The £12bn cuts have ALWAYS been said to be made to welfare and not welfare benefit – an extremely key point.
1. What has Osborne said?
Osborne alarmed Duncan Smith and angered Clegg when he said that £25bn in spending reductions, due to be imposed between 2016-17 and 2017-18, would have to include £12bn in welfare cuts.
The Guardian reported on this here and stated in this article that Clegg called this a monumental mistake, which it is as pensioner cuts are electoral suicide for any political party.
Conservative sources said Osborne’s intervention – a proposal that also promptedNick Clegg to publicly warn that the chancellor is in danger of making a “monumental mistake” – had highlighted stark differences of approach between the chancellor and Duncan Smith over how to reform Britain’s social security system. Osborne demanded that roughly half of future spending cuts in the next parliament come from the welfare budget.
2. What is the welfare BENEFIT budget broken down by pensioner and working-age spend?
We have a definitive answer on this from IDS as Hansard records and this is the total welfare spend is £170 billion with 68% or £116 billion going to the pensioner and 32% or £54 billion to working-age:
So we see the figures – those pesky things called FACT – that the Tories require £12 billion of welfare cuts as a matter of stated policy and the Tories are at pains to say they will not cut pensioner benefits. So this £12 billion must have to come from the £54 billion paid to those of working-age.
3. Is it possible to cut welfare benefits to working-age claimants by 22.22%?
YET..and note the wording very very carefully indeed…IDS et al has NOT said £12bn will be cut from the WELFARE BENEFIT BILL; rather than £12bn will be cut from the WELFARE BILL.
4. So what is ‘welfare?’
‘Welfare’ must have a wider context than just the welfare benefit bill as £12 bn simply cannot be cut from the £54 bn of welfare benefit spend that goes to working-age persons. IDS in the BBC Daily Politics debate on Tuesday 6 May said (when pushed) the £12 bn cut has yet to be decided which was well reported and unduly focused upon as what he also said was £12 bn from the £120 or so billion ‘welfare bill’ is only £1 in every £10.
Yet IDS admitted as the above reference reveals that the working-age WELFARE BENEFIT BILL is only £54 bn and this is clearly NOT what he and the Tories means by ‘welfare bill.’ It must mean this £120 bn working age welfare bill comprises £54 bn in working age welfare benefit PLUS £66 billion in other ‘welfare’ spend.
IDS also said all disability benefits will not be cut and also said that child benefit and child tax credit would not be changed.
That leaves WORKING TAX CREDITS as a key component of this other £66 billion of welfare spend from which part of the as yet unaccounted for £10 billion of cuts will come from.
IDS can ONLY mean he is seeking very significant cuts from WTC – the subsidy given to those (often forced onto) minimum wage jobs so that work always pays more.
Plausible? I can’t see anything else that could possibly be classed within this wider ‘welfare spend’ – a phrase which IDS and the Tories have been extremely careful to repeat and extremely careful not to say welfare BENEFIT spend.
That said cutting WTC will undoubtedly mean that work cannot always pay more as it is the presence of WTC that is used as a subsidy to low wages to make sure work does pay more!
What is implausible is many if not all of the existing speculations as to what benefits will be cut. The likes of winter fuel allowance has been touted but again dismissed specifically by IDS in the BBCDP debate and issues such as free TV licences are very insignificant in terms of any savings.
It has been mooted that DLA and other disability benefits could become taxable benefits and that would produce (at least superficial) savings at source yet as we have seen with the bedroom tax, benefit cap and other housing benefit reforms that also reduce at source, the overall HB bill increases in real terms by £440 million per year.
That leaves a wider application of existing reforms as an option. There was the Telegraph report here of extending the bedroom tax to pensioners that would double the £360 million at source cut and like other Tory policies they are often flagged up by friends at the Telegraph to gauge reaction.
Perhaps the bedroom tax could be applied to private rented housing too as that could be sold as being fair in the inimitable superficial way IDS sells policy. After all why should a single person in Liverpool get full housing benefit and be allowed two spare bedrooms just because the landlord is a private one? Note the LHA 1 person rate in Liverpool is £395 pcm and many 3 bed and even the odd 4 bed private property can be rented for £400 pcm and the single person gets £395 pcm in the LHA form of housing benefit for that.
If IDS rolls out Universal Credit to all then the mixed-age pensioner couple – where one partner is of state pension age and the other not – who now are exempt for bedroom tax purposes become liable for the bedroom tax under UC when both partners need to be of state pension age. This is estimated to hit 70 – 90,000 couples yet at the top end that is only £70 million per year and a long way short of the additional £10 billion.
So where are these additional £10 billion of ‘welfare’ cuts coming from? Remembering of course this is just part of the £12 billion in the first two years and part of wider and deeper stated cuts of £25 billion!
The answer is nobody knows, not even IDS, and this figure was and can only have been plucked out of thin air.
Some of the above will appeal to the tinkering IDS – as he did with the self-employed here – yet there is no way that £12 billion of cuts can come from the £54 billion working-age welfare benefit spend and so unless he can produce a rabbit out of a hat….
This is the worry and a real concern. IDS is incompetent and he is a zealot yet he is not stupid. To explain I cannot imagine that the £12 billion welfare cut, and especially the £10 billion cut as yet not accounted for, is all just thin air. IDS must have something in mind and something that Danny Alexander (remember him? You soon wont!) was not privy to. IDS always has some implausible superficial policy that is spun even more superficially before being announced to ensure everyone is ‘on message.’ Why should we pay for spare bedrooms the hardworking taxpayer can’t afford to have – that sort of thing – has been typical.
While IDS may have a get out by leading the let’s leave the EU campaign as rumoured – a subject that will dominate this parliament, totally dominate it – IDS will not want his legacy to be the man who said he would cut the burgeoning welfare budget then not come up with any plan to do that!
So what else can be classed as ‘welfare’ and what is the rabbit in the hat?
Sorry reader despite looking at all the research and at every welfare benefit I have no answers other than (a) don’t confuse welfare cuts with welfare benefit cuts as all to date have done; and (b) if you should see Paul Daniels sneak into Caxton House….