Autumn Statement 2013: Govt to bring in welfare cap
The Chancellor has announced a new cap to total welfare spending that will start a year early in 2014.
The cap, which will peg annual benefit increases to 1% for the next three years, will not include the state pension, which he said “is better controlled” by other means.
Jobseeker’s Allowance and other benefits that are modified depending on economic circumstances will also be excluded from the cap.
The bill for welfare is expected to be £112 billion in 2014, £113.1 billion in 2015 and £117.9 billion in 2016.
Osborne added the limit on welfare spending will be set at the beginning of each parliament with the support of MPs.
If the government ever exceeds the cap, it will have to explain itself to Parliament.
Shadow Chancellor Ed Balls and Labour’s spokesperson for work and pensions say they oppose cap, which they say results in a cut in real terms as inflation is expected to be 2.2% next year.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).