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26 March 2014

Duncan Smith: welfare cap will force ministers to choose between families and the disabled

The Work and Pensions Secretary says the policy "is not about punishing people, it's about saying that the money we have is finite."

By George Eaton

Other than an attempt to trap Labour, what is the point of the government’s new cap on welfare spending? That was the question put by Evan Davis to Iain Duncan Smith on the Today programme this morning. Duncan Smith explained that the cap, which will apply to all welfare spending except the state pension and cyclical unemployment benefits, was an attempt to bring “control” to a previously unlimited area of spending and to ensure that the government is more “accountable” to taxpayers for its decisions. 

When challenged on what would happen if a rise in spending in one area, such as disability benefits, led the cap (set at £119.5bn for 2015-16) to be breached, he said that the government would either “make adjustments” within the budget (i.e. cut benefits) or, if there was “a very strong and compelling reason” for the increase, would go to the House of Commons and seek MPs’ approval for a rise in the limit.

It was when Davis responded that this meant the cap was not much of a restriction at all (since the government can usually rely on backbench support on budgetary matters), that Duncan Smith revealed his preference. “I wouldn’t want to do that because it would show that we’ve failed,” he said of the prospect of a vote on raising the cap. Asked whether he would, for instance, be prepared to cut spending on family benefits if disability spending rises, he bluntly replied: “I’d adjust that internally”. He added that the policy was “not about punishing people” but “about saying that the money we have is finite.” In others words, if welfare spending rises faster than expected, someone will always have to pay the price. 

It’s for this reason that a significant minority of Labour MPs are so opposed to their leadership’s decision to support the cap (as The Staggers first revealed on Monday), with party whips expecting around 20 to rebel when the vote is held this afternoon. But as Duncan Smith went on to argue, Miliband’s backbenchers may have less to fear than they think. He derided Labour’s support for the cap as “a scam” on the basis that it had failed to say how it would pay for the £465m cost of abolishing the bedroom tax. Labour’s response is to point out that many housing experts expect the policy to cost more than it saves (due to an increase in homelessness and housing benefit claims for private properties) and that measures such as its living wage contracts would help to bring the benefits bill down.

But Duncan Smith’s broader point stands: there is nothing to stop a future Labour government adjusting the cap to make it less punitive. As Gavin Kelly noted on The Staggers yesterday, the coalition’s fiscal mandate, of which the cap is part, automatically dissolves at the end of this parliament and will be replaced by whatever arrangement the new administration sees fit. Labour has pledged to accept the coalition’s spending totals for 2015-16, which would mean maintaining a cap of £119.5bn, but expect the Tories to argue that, after this point, the opposition could not be trusted to be wise spenders. 

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