What does Miliband mean by the "structural" welfare bill?

It doesn't even need capping.

Ed Miliband will cap "structural welfare spending" if he is elected in 2015, he announced today, saying that "such a cap will alert the next Labour government to problems coming down the track and ensure that we make policy to keep the social security budget in limits."

It's not entirely clear what Miliband means by "structural" welfare spending at this point. It could just be a political fudge, designed to mimic the Conservatives' similarly fudgy focus on the "structural" deficit. The structural deficit is a particularly difficult thing to actually measure, because it relies on three pieces of information all of which are themselves uncertain: the output gap, the relation of public spending to economic growth, and the response of tax revenues to both.

Get any of them wrong, and your estimate of the structural deficit is off; get all three wrong, and you can be billions of pounds off the mark. And look at just the variation in the estimates of the output gap, via Touchstone:

But whereas the structural deficit is at least a conventional economic concept, albeit one hugely prone to measurement error, it's not entirely clear what "structural" welfare spending is, and even less clear how to cap it.

The best guess is that the structural welfare bill is the bill which we would expect to see in normal times; in other words, Labour won't view a rise in housing benefit due to the recession as a problem, but would be more concerned if, during the recovery, it fails to drop down to lower levels.

If that is the definition, then it has an interesting outcome once Labour start to cap it, because, as Declan Gaffney showed last month, "there has been no structural increase in the level of aggregate working age welfare spending for a very long time". That's because welfare spending, properly construed, must take into account foregone revenue as well as public expenditure: the most prominent example of which is tax credits. Around £3bn of the cost of tax credits in 2012/13 came from an offset to income tax. Money wasn't being "spent", but it was certainly a cost of welfare.

And when you take into account other taxation expenditures – like the mortgage interest tax relief, which was abolished in 2000 – you find that structural welfare costs have stayed remarkably stable. This chart again from Declan Gaffney's piece:

 

The real question is what "structural" welfare means for people not of working age. Because, thanks to our ageing nation, the state pension liability is growing year-on-year, and even pushing back the pension age by a year from 2026 won't help too much. Of course, it would be possible for Labour to define that increase as something other than structural – "demographic", perhaps – and thereby dodge the question. But if they don't, the key effect of this promise could be that Labour has pledged to cut pensions, two years before a general election against a party which has pledged to keep them above inflation and wage rises indefinitely.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Commons Confidential: What happened at Tom Watson's birthday party?

Finances, fair and foul – and why Keir Starmer is doing the time warp.

Keir Starmer’s comrades mutter that a London seat is an albatross around the neck of the ambitious shadow Brexit secretary. He has a decent political CV: he was named after Labour’s first MP, Keir Hardie; he has a working-class background; he was the legal champion of the McLibel Two; he had a stint as director of public prosecutions. The knighthood is trickier, which is presumably why he rarely uses the title.

The consensus is that Labour will seek a leader from the north or the Midlands when Islington’s Jeremy Corbyn jumps or is pushed under a bus. Starmer, a highly rated frontbencher, is phlegmatic as he navigates the treacherous Brexit waters. “I keep hoping we wake up and it’s January 2016,” he told a Westminster gathering, “and we can have another run. Don’t we all?” Perhaps not everybody. Labour Remoaners grumble that Corbyn and particularly John McDonnell sound increasingly Brexitastic.

To Tom Watson’s 50th birthday bash at the Rivoli Ballroom in south London, an intact 1950s barrel-vaulted hall generous with the velvet. Ed Balls choreographed the “Gangnam Style” moves, and the Brockley venue hadn’t welcomed so many politicos since Tony Blair’s final Clause IV rally 22 years ago. Corbyn was uninvited, as the boogying deputy leader put the “party” back into the Labour Party. The thirsty guests slurped the free bar, repaying Watson for 30 years of failing to buy a drink.

One of Westminster’s dining rooms was booked for a “Decent Chaps Lunch” by Labour’s Warley warrior, John Spellar. In another room, the Tory peer David Willetts hosted a Christmas reception on behalf of the National Centre for Universities and Business. In mid-January. That’s either very tardy or very, very early.

The Labour Party’s general secretary, Iain McNicol, is a financial maestro, having cleared the £25m debt that the party inherited from the Blair-Brown era. Now I hear that he has squirrelled away a £6m war chest as insurance against Theresa May gambling on an early election. Wisely, the party isn’t relying on Momentum’s fractious footsloggers.

The word in Strangers’ Bar is that the Welsh MP Stephen Kinnock held his own £200-a-head fundraiser in London. Either the financial future of the Aberavon Labour Party is assured, or he fancies a tilt at the top job.

Dry January helped me recall a Labour frontbencher explaining why he never goes into the Commons chamber after a skinful: “I was sitting alongside a colleague clearly refreshed by a liquid lunch. He intervened and made a perfectly sensible point without slurring. Unfortunately, he stood up 20 minutes later and repeated the same point, word for word.”

Kevin Maguire is the associate editor (politics) of the Daily Mirror

Kevin Maguire is Associate Editor (Politics) on the Daily Mirror and author of our Commons Confidential column on the high politics and low life in Westminster. An award-winning journalist, he is in frequent demand on television and radio and co-authored a book on great parliamentary scandals. He was formerly Chief Reporter on the Guardian and Labour Correspondent on the Daily Telegraph.

This article first appeared in the 19 January 2016 issue of the New Statesman, The Trump era