X

Create an account to continue reading.

Registered readers have access to our blogs and a limited number of magazine articles
For unlimited access to The Spectator, subscribe below

Registered readers have access to our blogs and a limited number of magazine articles

Sign in to continue

Already have an account?

What's my subscriber number?

Subscribe now from £1 a week

Online

Unlimited access to The Spectator including the full archive from 1828

Print

Weekly delivery of the magazine

App

Phone & tablet edition of the magazine

Spectator Club

Subscriber-only offers, events and discounts
 
View subscription offers

Already a subscriber?

or

Subscribe now for unlimited access

ALL FROM JUST £1 A WEEK

View subscription offers

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating an account – Your subscriber number was not recognised though. To link your subscription visit the My Account page

Thank you for creating your account – To update your details click here to manage your account

X

Login

Don't have an account? Sign up
X

Subscription expired

Your subscription has expired. Please go to My Account to renew it or view subscription offers.

X

Forgot Password

Please check your email

If the email address you entered is associated with a web account on our system, you will receive an email from us with instructions for resetting your password.

If you don't receive this email, please check your junk mail folder.

X

It's time to subscribe.

You've read all your free Spectator magazine articles for this month.

Subscribe now for unlimited access – from just £1 a week

You've read all your free Spectator magazine articles for this month.

Subscribe now for unlimited access

Online

Unlimited access to The Spectator including the full archive from 1828

Print

Weekly delivery of the magazine

App

Phone & tablet edition of the magazine

Spectator Club

Subscriber-only offers, events and discounts
X

Sign up

What's my subscriber number? Already have an account?

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating your account – To update your details click here to manage your account

Thank you for creating an account – Your subscriber number was not recognised though. To link your subscription visit the My Account page

Thank you for creating your account – To update your details click here to manage your account

X

Your subscriber number is the 8 digit number printed above your name on the address sheet sent with your magazine each week.

Entering your subscriber number will enable full access to all magazine articles on the site.

If you cannot find your subscriber number then please contact us on customerhelp@subscriptions.co.uk or call 0330 333 0050.

You can create an account in the meantime and link your subscription at a later time. Simply visit the My Account page, enter your subscriber number in the relevant field and click 'submit changes'.

Please note: Previously subscribers used a 'WebID' to log into the website. Your subscriber number is not the same as the WebID. Please ensure you use the subscriber number when you link your subscription.

Coffee House

Rachel Reeves’s ‘staggering’ and ‘astonishing’ future of welfare speech

7 August 2014

11:26 AM

7 August 2014

11:26 AM

Rachel Reeves, the Shadow Work and Pensions Secretary, gave a speech earlier this week on the future of the welfare system. The choice that she presented was one between ‘…failing programmes and waste driving up social security spending under the Tories’, and Labour’s reforms to ‘…make work pay and get social security spending under control’. To claim that the current government has failed to control benefit spending is a bold tactic from a Labour Party economic spokesperson, and the numbers used to support the argument were so striking that they deserve some scrutiny.

Claim One: The Conservatives have spent £13bn more on social security in this parliament than they had originally intended to.

If this figure is correct, it equates to an average annual overspend over five years of around £2.6bn, which is just over 1 per cent of total welfare expenditure in 2014/15. The recently announced Welfare Cap, which sets an annual limit on the spending of a collection of benefits, and which has cross-party support, has an allowable margin of forecast error of 2 per cent. With this in mind, the £13bn figure looks like less a gross mismanagement of public funds, and more of an understandable error inherent in producing forecasts in a period of economic uncertainty.

Claim Two: The number of working people claiming housing benefit will double between 2010 and 2018, and will cost a ‘staggering’ £12.9bn.

[Alt-Text]


According to the government’s forecast, the number of housing benefit claimants who are jobseekers will fall from 643,000 in 2010/11 to 494,000 in 2018/19, and claimants who also receive working age income-related benefits will fall from 143,000 in 2010/11 to 32,000 in 2018/19. In other words, it is reasonable to expect that, as the labour market improves, some claimants who had previously not been working (or who are on income-related benefits) will become claimants who are working, or who have higher incomes. In total, the government forecasts that the total number of people claiming housing benefit will rise by just under 8 per cent between 2010/2011 and 2018/19, far less than the doubling of working claimants that Labour believes will occur. The increased cost argument also looks flimsy; the housing benefit bill rose by an average annual rate of 6.1 per cent between 2005 and 2010, but only by 2.2 per cent a year between 2010 and 2015.

Claim Three: Tax Credit expenditure will rise by an ‘astonishing’ £2.5bn over the next parliament.

This figure looks to be in the right ballpark, but given that expenditure on Child and Working Tax Credit fell in real terms over the course of this parliament, yet increased by 43 per cent between 2005 and 2010, which amounts to an £9bn increase in 2014/15 prices, it is difficult to see why the conclusion has been reached that this spending increase is actually that ‘astonishing’. What’s more, the implication of this statement is that Labour thinks tax credit spending is too high. If that is the case, it is unclear how they intend to bring it down.

Hopefully, as the electoral race unfolds over the next nine months, there will be a sensible debate about the future options for the public finances, and clarity on the strategy each party has for managing them.

Steve Hughes is the Deputy Head of Economic and Social Policy at Policy Exchange

 

Subscribe to The Spectator today for a quality of argument not found in any other publication. Get more Spectator for less – just £12 for 12 issues.


Show comments
Close