We were anticipating the announcement about a cap on Annually Managed Expenditure (AME) spending for the Department for Work and Pensions (DWP). This accounts for a huge lump of government spending overall – much of the rest of the savings are tinkering by comparison.
We were anticipating the announcement about a cap on Annually Managed Expenditure (AME) spending for the Department for Work and Pensions (DWP).
This accounts for a huge lump of government spending overall – much of the rest of the savings are tinkering by comparison.
The surprise was the list of benefits contained within the cap – particularly Housing Benefit and Tax Credits.
We’ve seen in this recession that unemployment rose but not by as much as in previous downturns. Workers and employers were able to reduce hours without making as many people redundant as expected.
This was in part made possible by the system of means-tested benefits for people in work – primarily, yes, Tax Credits and Housing Benefit. Recent JRF evidence showed there are 4.3m people claiming benefits whilst in work. The suggestion that spending on these benefits does not reflect economic cycles is hard to take seriously.
However, it’s not clear yet how the cap will be policed. If spending is breached, then DWP is required to report to Parliament in the manner of a naughty schoolchild.
Given that so much of AME remains outside of direct DWP control, it’s feasible that this will simply become a routine part of the political calendar, in a similar way to DWP’s accounts never being signed off because of levels of error in benefit payments.
The scheme also will not come in until after the next election.
It’s much more important to address the drivers of need – high housing costs and low wages – that are in part the responsibility of other departments – Communities and Local Government and Business, Innovation and Skills for example.
The overly-departmentalised view of public spending does not help break through some of these tricky problems.
Jobseeker’s Allowance (JSA) – currently £71.70 per week; and 40 per cent of the minimum acceptable standard of living – is clearly part of cyclical spending and will not be included in the AME cap. People who lose their jobs will now not be able to claim JSA until they have been looking for work for seven days.
Many will also be required to come into Jobcentre Plus (JCP) more often (weekly rather than fortnightly).
Without expanding the resources of JCP, this implies they will receive less interaction with an adviser per visit. The key to good job outcomes is personalised support as soon as possible. There’s a risk that the quality of support will decline and people will be left without recourse to funds when they become unemployed.
Already nearly half of people eligible don’t bother to claim for JSA. And there are already significant delays in getting benefits to people in need.
The dangers are compounded by the uncertainty surrounding Social Fund support since its localisation this year. We want unemployed people to claim their entitlements and be given the support they need to get back into work as quickly as possible.
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