The new year has just begun and already ‘benefits culture' and the wider issue of welfare provision have blazed into controversy.
Taking to Andrew Marr's sofa for the first Sunday morning grilling of 2014, prime minister David Cameron confirmed the triple-lock protection on the state pension would be the first plank of the Conservative Party general election manifesto.
The airwaves were also abuzz with anger, as hundreds of viewers complained to TV regulator Ofcom after the first episode of a new Channel 4 series Benefits Street – which focuses on residents in the deprived Winson Green area of Birmingham.
Around 300 viewers got in touch, some to register their unhappiness with what many saw as a negative portrayal of benefits claimants and others for the show's depiction of criminal activity. Making his New Year statement on the economy, coincidentally, in Birmingham, chancellor George Osborne made capping welfare costs one of five main priorities.
The chancellor said current forecasts implied further total spending cuts of around £25bn over two years by 2017-18. ‘Government is going to have to be permanently smaller – and so too is the welfare system,' Mr Osborne said.
Based on these projections, and in order to maintain the pace of 2.3% annual departmental spending reductions, further £12bn welfare savings would be required in the first two years after the 2015 general election, Mr Osborne stated.
‘Britain is a proud country that does, and in my view always should, protect the most vulnerable through our welfare system,' the chancellor said.
‘But it should not be a welfare system that offers up benefits as a lifestyle choice,' he added.
Given these intentions, how could welfare provision be reshaped in the aftermath of the next general election? Renowned public finance experts the Institute for Fiscal Studies (IFS) told The MJ the Autumn Statement showed debt interest spending and state pensions costs were increasing faster than economy-wide inflation – a pattern set to continue.
Welfare payments to working age individuals would have saved the Exchequer £20bn by 2015/16, rising to £25bn by 2018/19 – the year in which Mr Osborne hopes the nation's finances will return a budget surplus.
This year, for the first time, the Government will set a cap on the overall welfare budget as part of measures to enshrine a commitment to budget responsibility through a new charter. But, protected by the triple-lock – a guarantee to increase the state pension every year by the higher of inflation, average earnings or a minimum of 2.5% – the £83bn state pensions bill won't be included in the cap.
This means working age welfare claimants remain firmly in the chancellor's sights.
Andrew Haldenby, director of independent think-tank Reform, noted: ‘The Government is already increasing welfare benefits at a slower rate than in
previous years.'
‘If it were to freeze such benefits in the first two years of the next Parliament in cash terms, it would save nearly £3bn,' he added.
Of immediate effect are proposals to make young people aged under 25
ineligible for housing benefit with a view to reducing the annual £24bn housing
benefit bill.
Housing experts have been quick to argue the chancellor is attempting to control costs rather than address the fundamental problems facing housing and labour markets.
Grainia Long, chief executive of the Chartered Institute of Housing, branded the measure a dangerous move. ‘It is difficult to build the economy without a young, mobile workforce,' Ms Long said.
‘The reason the housing benefit bill is so high is that the cost of housing is becoming unaffordable for many people, including an increasing number of people in work,' she said.
National Housing Federation head of policy, Kevin Williamson, echoed the concerns. ‘Housing benefit is a crucial safety net that should be decided on the needs of the individual, not simply their age,' he said.
‘Cutting the housing benefit of under-25s will put many young people at risk of homelessness, particularly those who can't go back to their family home. Some may
not even have a home to return to.'
Other elements of the welfare bill set for a haircut include child benefit. Families with one earner with an income of more than £60,000 can no longer claim child benefit.
Economists at the IFS have predicted long-term savings of £4.5bn if the threshold was lowered to £27,000 with one child or £33,000 with two.
Seeking to address popular concerns about Shameless families – a production this time from Channel 4's drama, and not current affairs department, the £26,000 a year household benefit cap has been in place for nearly a year.
Data from the Department for Work and Pensions released showed 32,940 households nationally have had their benefits capped since its introduction in April 2013. In London, 15,342 households are affected, which equates to 47% of all households and nine out of the 10 local authority areas most affected by the benefit cap are in London.
Hackney mayor and chair of London Councils, Jules Pipe is, unsurprisingly, angered at the capital's position. ‘Londoners are being unfairly penalised by a policy that fails to recognise that they face higher rents, a higher cost of living and strong competition for jobs,' said Mayor Pipe.
Similarly, more stringent eligibility criteria have been introduced for Disability Living Allowance (DLA) – whose costs increased in real terms by 80% between 1997/98 and 2010/11 by around £5bn annually.
Means-testing DLA could deliver savings worth more than £2bn annually.
The fate of Universal Credit (UC) remains the great unknown in all this. Largely unnoticed, the Autumn Statement contained some sharp measures to tighten eligibility for lower income families. Effectively, the Treasury has banked an extra £600m savings from UC before its national roll-out.
But the troubled flagship coalition welfare programme is becoming further mired by technical delays, cost overruns and the sort of vicious Whitehall infighting that makes Game of Thrones appear like an episode of Miranda by comparison.
Ahead of last year's Autumn Statement, drastically revised forecasts for UC's introduction were issued. There are now expected to be 400,000 UC claimants in 2015/16 – rather than the previously forecast 4.5 million people in receipt of six amalgamated means-tested benefits.
Most claimants would be migrated over to the single monthly UC payment between 2016 and 2017. Leaked documents issued recently revealed an enraged minister for the Cabinet Office, Francis Maude, had withdrawn experts from the Government
Digital Service – leaving the DWP with insufficient in-house staff to manage the formidable IT challenges.
The cause of the dispute appeared to centre around work and pensions secretary Iain Duncan Smith's insistence on a twin-track approach for delivering UC, so as to prove the service is working before the 2015 election.
This involves pursuing the original technological development – of which £40m has already been written off – while simultaneously ploughing more significant resources into a web-based service more aligned to Whitehall's digital-by-default strategy – and would so require less help from Jobcentre Plus staff.
Friction between the two men is causing ‘high level' risk to the programme the minutes revealed – although Mr Maude later sought to scotch allegations of a rift.
At local level, the Local Government Association (LGA) claimed councils would have to impose further reductions to council tax support schemes following the decision to merge the specific grant to pay for them into general funding.
Sharon Taylor, chair of the LGA's finance panel, claimed up to one in three councils might be forced to ask working age people on low incomes to pay a greater share of council tax to help cover what a potential £1bn shortfall by 2016.
There is plenty more local drama to come on benefits street
