George Osborne delivers his speech at the Conservative conference in Birmingham last month. Photograph: Getty Images.
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The OBR shows why welfare cuts won't control spending

Inadequate wages and extortionate rents are pushing up the housing benefit bill. 

George Osborne prides himself on his commitment to bear down on welfare spending, but today's report from the OBR (handily commissioned by the Chancellor) shows how he's struggling. It warns that the new cap imposed on expenditure is in danger of being breached due to the botched implementation of disability benefit reforms and the surging housing benefit bill. 

Between March 2011 and March 2014, forecast spending on incapacity benefits for 2015–16 has been revised up by £3.5bn (34 per cent) due to a higher than expected caseload, slower than expected transfer from incapacity benefit to the new employment and support allowance, and a lower than expected number being found "fit for work" (and therefore ineligible for full support). 

In addition, forecast spending on housing benefit (or, as you might call it, landlord subsidy) has been revised up by £2.5bn (11 per cent) since the expected number of renters and the level of rents relative to earnings have increased at a faster rate than predicted. As wages have continued to lag behind inflation, the number forced to rely on welfare to remain in their homes has surged. The government is now forecast to spend more than £27bn on housing benefit by 2018-19, accounting for more than 11 per cent of welfare expenditure. 

As the OBR notes, one of the main causes of higher spending has been the shift from public to private rented housing. In 2012-13, the number of private renters exceeded the nunber of social renters for the first time in nearly 50 years. Since private rents are usually higher than social rents, the housing benefit bill has risen accordingly. The OBR also notes that "rents have risen faster than earnings and inflation over the past decade." 

What all of this shows is the limits of an approach that focuses on salami slicing the welfare budget (through measures such as the benefit cap and the "bedroom tax"), rather than addressing the structural drivers of higher spending. Unless problems such as inadequate wages and extortionate rents are tackled (through a significantly higher minimum wage, greater use of the living wage, more affordable housing and limits on rent increases, as proposed by Labour) then it will become ever harder to control expenditure. 

George Eaton is political editor of the New Statesman.

Photo: Getty
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Cabinet audit: what does the appointment of Liam Fox as International Trade Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for International Trade.

Only Nixon, it is said, could have gone to China. Only a politician with the impeccable Commie-bashing credentials of the 37th President had the political capital necessary to strike a deal with the People’s Republic of China.

Theresa May’s great hope is that only Liam Fox, the newly-installed Secretary of State for International Trade, has the Euro-bashing credentials to break the news to the Brexiteers that a deal between a post-Leave United Kingdom and China might be somewhat harder to negotiate than Vote Leave suggested.

The biggest item on the agenda: striking a deal that allows Britain to stay in the single market. Elsewhere, Fox should use his political capital with the Conservative right to wait longer to sign deals than a Remainer would have to, to avoid the United Kingdom being caught in a series of bad deals. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.