Welfare

May 17, 2017 10:19 AM

Despite much publicity being given to welfare “cuts” made since 2010, UK welfare spending makes up a greater proportion of public spending today than it did in 2009-10 (27.8 per cent vs 26.9 per cent). During this period the proportion of welfare spending received by pensioners has increased from 51.7 per cent of the budget to 55.6 per cent of the budget.

Here are four selected proposals for welfare reform the next Government should implement:

1. State pension triple lock

Spending on the state pension and pension credit has become unaffordable. The “triple lock” promise (that pensions will always rise by whichever is higher out of inflation, earnings growth or 2.5 per cent) made by the Conservatives before the 2010 election was incredibly irresponsible. The annual cost of the policy is estimated by the Government Actuary’s Department to be £6 billion.

There is next to no support for the triple lock beyond those in receipt of the state pension and politicians eager to buy their votes. In the short term the savings may be relatively modest because of the recent pick-up in inflation, but it is important to reverse this costly mistake as soon as possible and resume uprating the state pension by inflation.

2. Child benefit and child tax credit

There have been efforts to ensure that better-off families stop receiving child benefit. George Osborne announced at the 2010 Conservative party conference that child benefit would be tapered away from individuals earning over £50,000 and withdrawn at £60,000. But there were problems with that policy which quickly came to light, not least that households with two earners who were on each on, for example, £50,000 would keep the benefit in full.

It makes little sense having two separate benefits ostensibly to help parents with the cost of bringing up children. Child benefit should be abolished with the child element of the child tax credit increased to address child poverty concerns.

3. Housing Benefit

Flattening housing benefit rates by reducing the number of ‘broad rental market areas’ (BRMAs) could significantly reduce housing benefit expenditure, particularly in London and the South East. There are over 150 BRMAs in England alone, and areas of high rent have disproportionately large numbers of housing benefit claimants. By determining rates over a wider rental market area, there would be lower benefit expenditure and less pressure in high-cost areas within regions.

Housing benefit rates should be flattened across the UK in order to reduce expenditure by 10 per cent. People who have to pay for their own housing frequently have to broaden their geographical sights to find somewhere in their price range so it is not unreasonable for benefit claimants to be asked to do the same. Many of those who work in London are forced by high prices to look outside the city and commute. Housing benefit claimants should not be immune from this reality of life.

4. Contributory Benefits

Contributory benefits are paid dependent on national insurance contributions. While a significant sum is spent on them, most of the expenditure would be replaced by equivalent benefits where eligibility is assessed on income.

These benefits are paid to people who do not need them. It makes little sense to tax people and then hand those same people back benefits in the form of insurance against events that they could otherwise afford to insure themselves against if they wanted to. It would also make abolishing national insurance simpler.

Latest Blogs:

TaxPayers' Alliance Icon

The dream of home ownership

1:58 PM 20, Nov 2017 Ben Ramanauskas

TaxPayers' Alliance Icon

The REAL impact of beer duty

3:14 PM 14, Nov 2017 Ben Ramanauskas

TaxPayers' Alliance Icon

Paradise Papers

1:44 PM 06, Nov 2017 Duncan Simpson

TaxPayers' Alliance Icon

Innovations like "CareBnB" are good for the NHS

4:39 PM 02, Nov 2017 The TaxPayers' Alliance