Two major speeches targeted at less than 2 per cent of welfare spending

Two major speeches, two policies announced, two benefits targeted but less than 2 per cent of welfare spending affected.

Nick Davies is policy manager for Children England

With all eyes focussed on the budget stand off across the pond, it’s important not to lose track of some of the illogical book balancing taking place in the UK.

Specifically, the government’s attempts to slim the benefits bill by focussing on relatively small parts of it (though this is clearly only one of many criticisms that could be made of the coalition’s approach to welfare reform).

The Conservative Party conference saw the debut of two significant welfare policies.

On Monday, George Osborne set out plans for those who have finished with the Work Programme to move onto a new ‘help to work’ scheme. Claimants will have to attend compulsory training, visit a Jobcentre Plus daily or undertake a work placement in order to still qualify for Jobseekers Allowance.

It is estimated that this will affect around 200,000 people, 13 per cent of JSA claimants. Assuming that these claimants are representative, they will be claiming around £650m a year. This is roughly 0.4 per cent of the total welfare bill.

The other major welfare announcement at the Conservative conference came in David Cameron’s speech on Wednesday. Despite apparently attempting a policy-free speech, he announced plans for under-25s to lose their automatic right to Housing Benefit and Jobseeker’s Allowance (JSA) if they refuse to take up offers of work, training or education.

In 2011/12, total government spending on JSA was £4.91bn. Although 27 per cent of JSA claimants are under the age of 25, they account for less than 20 per cent of spending on the benefit as they receive a reduced rate (from the DWP tabulation tool). Total spending on JSA for under-25 is therefore around £1bn or just 0.6 per cent of the total benefits bill.

Housing Benefit for under-25s appears at first to be a much riper target for savings. It is in fact the second most expensive benefit, costing £16.94bn in 2011/12.

However, claimants under the age of 25 represent less than 7 per cent of the total. Given that most under-25 receive the shared accommodation rate, rather than the full rate, it is safe to assume that they will account for an even smaller percentage of the cost. Total spending on Housing Benefit for under-25 is therefore no more than £1.2bn or just 0.7 per cent of the total benefits bill.

Two major speeches, two policies announced, two benefits targeted but less than 2 per cent of welfare spending affected.

It’s a similar story when looking at other flagship policies. The benefits cap includes benefits received by millions of people yet it will actually only affect 67,000 for a saving of £290m, less than 0.2 per cent of the UK’s spending on benefits.

Likewise, the government estimates that the spare room subsidy/bedroom tax will only save £500m, but even that looks extremely optimistic given the additional Housing Benefit costs associated with tenants moving from social to private accommodation.

Finally, fraud, a favourite of all ministers seeking to sound tough on welfare dependency, costs only £1.2bn a year or 0.7 per cent of total benefits expenditure.

Given the government’s relentless focus on these relatively small pots of welfare spending, it’s no wonder that the public is confused. A recent survey by Ipsos MORI found that:

  • 29 per cent of people think we spend more on JSA than pensions, when in fact we spend 15 times more on pensions (£4.9bn vs £74.2bn)

  • People estimate that £24 out of every £100 spent on benefits is claimed fraudulently, compared with official estimates of £0.70 per £100

  • People are most likely to think that the benefits cap will save most money from a list provided (33 per cent pick this option), over twice the level that select raising the pension age to 66 for both men and women. In fact, raising the pension age saves £5bn, compared to just £290m for the benefits cap.

Of the 20.3 million people who receive benefits of some kind, 8.7 million are pensioners. Indeed, state pensions account for 47 per cent of total benefit spending (52 per cent if you also include the Pension Credit and Minimum Income Guarantee).

Yet, while working-aged benefits are cut and made more conditional, Iain Duncan Smith used his conference speech to highlight government policies to increase pensions and remove means testing!

If only there was a phrase for an issue which is large, grey and ignored…

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