Government goes cap-in-hand to Parliament after breaching its own welfare spending cap

MPs signed off a breaching of the cap

Caroline Nokes of the DWP (House of Commons)

The Government has gone cap-in-hand to Parliament after official forecasts showed ministers were on course to breach their own total welfare spending cap.

The cap, introduced by George Osborne with the apparent intention of embarrassing future Labour governments, mandates the maximum amount of the Budget that can be spent on social security benefits.

MPs agreed a motion that the breaching of the cap was “justified” and that no further action should be taken, but Labour’s front bench said the Conservative government was “failing its own tests”.

Caroline Nokes, a DWP minister, said the cap would be breached for the second year running because of the decision to half a series of disability benefit cuts and because inflation would be somewhat higher than expected.

She denied spending was “out of control” – but Labour said welfare spending could be reduced by tackling the affordable housing crisis and thus cutting the £100 billion spend on housing benefit in this parliament.

“I would now like to outline the reasons why the cap is forecast not to be met in those years,” Ms Nokes told the House of Commons

“This is due to increased forecast inflation and spend on disability benefits, partly due to the decision not to pursue the personal independence payment measure proposed at Budget 2016.

“As with our decision not to pursue the tax credits measure, the Government have once more listened and responded to public concerns, and we have decided not to pursue the changes to the personal independence payment.

“Higher forecast inflation is another factor contributing to the cap not being met in 2019-20 and 2020-21. In view of the uncertainty facing the economy, inflation is now forecast to be higher than when the cap was set at summer Budget 2015.

“I would like to reassure the House that the latest forecasts do not mean that welfare spending is out of control. As my right hon. Friend the Chancellor announced at autumn statement, we will deliver the welfare savings we have already announced and legislated for.

“I would also like to repeat that the Government have no plans for further welfare savings in this Parliament.”

Following the debate, Labour’s Debbie Abrahams, shadow Work and Pensions Secretary, said the approach to the cap made a “mockery” of former chancellor Mr Osborne’s claim the cap would prevent “out of control” spending.

Labour's Debbie Abrahams criticises the Government for failing to meet its promises (House of Commons)

“Never has a Government been so adept at failing its own tests. Now we can add the Tories’ ‘welfare cap’ to their pile of broken promises. Another red-faced minister had to stand in front of the dispatch box and explain to us why it is that they will spend more than their self-imposed limit on social security in every one of the five years of this parliament,” she said.

“This is a far cry from 2014, when the former Chancellor, George Osborne, announced his welfare cap with such glee saying, ‘The welfare cap marks an important moment in the development of the British welfare state…and ensures that never again can the costs spiral out of control’. But the welfare cap only serves to highlight the failure of his own government on the economy and social security.

“It is the failure to take a common sense approach that has led to the Tories’ welfare cap lying in tatters and an embarrassed minister making excuses in the Commons yet again. Their slash and burn economic strategy has failed. Instead we must tackle the structural problems driving social security spending to ensure that, like the NHS, the social security safety net remains there for us all in our time of need.”

The cap should not be confused with the household benefit cap, which was also introduced by Mr Osborne. That separate cap limits the amount any single household can receive in social security assistance.