Steve Hughes

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

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.

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.

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