Work and pensions secretary Iain Duncan Smith. Photo: Getty
Show Hide image

The Tories are set to breach their own welfare spending cap – here’s why

Despite all the distress and financial hardship caused by a malfunctioning assessment process, spending on the government’s main sickness and disability benefit is set to rise.

The BBC are reporting that spending on Employment and Support Allowance (ESA) – the benefit for those who are unable to work as a result of a health condition or disability – is rising to the extent that the work and pensions Secretary Iain Duncan Smith could breach his own self-imposed welfare spending cap.

ESA was a response to the sharp rise in the numbers claiming its predecessor – Incapacity Benefit – under Thatcher and Major in the 1980s and 1990s. Unfortunately controversy has dogged it since its introduction in 2008. The test to determine entitlement – the Work Capability Assessment (WCA) – has produced thousands of incorrect decisions, with at least 15 per cent of those declared “fit for work” having this overturned on appeal.

Although the Tories knew about these issues when they came to power, they actually increased the number of assessments – moving beyond just looking at new claimants (as Labour had done) to the reassessment of the 2.2 million existing Incapacity Benefit claimants.

And yet the internal memo seen by the BBC today predicts that the cost of ESA will rise by nearly £13bn between the current financial year and 2018-19.

This could reflect a trend that I first identified in a House of Commons debate in April. I noted that although the total number of ESA/Incapacity Benefit claimants was set to fall by 150,000 between 2011 and this year, figures that isolate the impact of the Incapacity Benefit reassessment reveal that between the start of the process and March last year, 235,000 claimants had been reassessed as “fit for work”.

So over a shorter time period, 235,000 people were kicked off benefits, and yet the overall reduction in claimants was only 150,000. Clearly something was and is awry. What?

The leaked document suggests that the severity of ESA claimants’ illnesses and disabilities had been underestimated and noted that a new contract for the face-to-face part of WCAs could cost three times as much as the £100m per year currently paid to the much-criticised French IT firm Atos.

However I would argue that another key factor is the failure of the government’s Work Programme, where contractors are paid to support people into jobs. Figures from March 2014 show that between June 2011 and December 2013, only 2,500 of the 24,620 former Incapacity Benefit claimants declared fit for work and on the Work Programme had found a job. Perhaps unsurprisingly, those left behind will simply reapply for ESA for a second time round.

This demonstrates that despite the excessive severity of the test and all the distress and financial hardship this has caused claimants, the government’s attempt to reduce the numbers on benefits and control spending will have fallen well short.

If Labour win power in 2015 we have committed to overhauls of both the test and the support given to people to find work – both of which, as today’s reports demonstrate, are clearly needed.

Sheila Gilmore is MP for Edinburgh East and a member of the Work and Pensions Select Committee. She keeps a record of her work and research on ESA on her website.

Sheila Gilmore is Labour MP for Edinburgh East

Photo: Getty
Show Hide image

Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

0800 7318496