Welfare spending: what’s in £218.3 billion?

More than a year has passed since the Summer Budget 2015 and the then Chancellor’s commitment to save £12 billion from the welfare budget. Over the next Parliament, total UK welfare spending is forecast to fall by around £7 billion (3.2%) between 2015-16 and 2019-20.

But what makes up welfare spending? This blog uses the House of Commons Library’s new Welfare Expenditure and Savings Tool to answer some frequently asked questions.

So, how much do we spend on welfare?

In 2016-17 we’ll spend, across the UK, around £218.3 billion on welfare, according to DWP’s Benefit Caseload and Expenditure tables. That’s equivalent to around 11% of GDP or 28% of total managed expenditure.

And that includes…?

All UK expenditure on social security benefits and tax credits.

That means things like disability benefits, ESA and incapacity benefits, Housing Benefit, Jobseeker’s Allowance, Universal Credit and the State Pension. It also covers Child and Working Tax Credits and Child Benefit.

While the former are all administered by either the Department for Work and Pensions (in Great Britain) or the Department for Communities (in Northern Ireland), tax credits and Child Benefit are administered by Her Majesty’s Revenue and Customs (across the UK).

… so that’s mostly spending on the unemployed, right?

No. In 2016-17 spending on Jobseeker’s Allowance (JSA”) and Income Support (working-age non-incapacity) will be around 2.2% of total welfare expenditure. Expenditure on Employment Support Allowance (ESA), for people assessed as being too disabled or ill to work – and other incapacity benefits will be around 6.8% of total spending.

Other benefits make up a much larger proportion of welfare spending – take a look at the chart below.  

Oh. So which are the three largest sources of welfare spending?

The State Pension is the largest single source of welfare spending, making up around 42% of total expenditure in 2016-17. The State Pension has been the largest single source of expenditure in every year since 1996-97 (and has always been so), when it comprised 36% of total spending. By 2020-21, the State Pension is forecast to make up around 45% of welfare spending click now.

HMRC tax credits will make up around 13% of expenditure in 2016-17, equivalent to about £28.5 billion. Housing Benefit is the third largest source of expenditure, making up around 11% of total spending.

But hasn’t the Government been making cuts to welfare?

Yes – at Budget 2010 the Government promised to “tackle welfare dependency and unaffordable spending”, while at the Summer Budget 2015 the Chancellor committed to saving £12 billion from the working-age welfare bill.

These cuts are yet, however, to result in a sustained fall in total welfare expenditure. Expenditure did fall in 2013/14 by 1.2% compared to the previous year. In other years up to 2015-16 it continued to increase, however, though more slowly than would otherwise have been the case had changes not been made.

Ah. In that case, does welfare expenditure keep on rising?

Welfare expenditure in Great Britain rose, in real terms compared to the previous year, in 31 of the 37 years between 1979-80 and 2015-16. It fell in six years: from 1987/88 to 1989/90, in 1996/97, 1997/98 and 2013/14. The OBR’s June 2015 Welfare Trends report looks at this more closely.

Expenditure is forecast to fall, however, over the next four years: from £219.9 billion across the UK in 2015-16 (real terms 2016-17 prices) to £212.9 billion in 2019-20 (real terms 2016-17 prices).

This is in part due to welfare changes announced by the Chancellor between June Budget 2010 and March Budget 2016. Assuming all savings announced by the Chancellor since June 2010 are realised, as initially forecast, in full, a total of around £36 billion (real terms 2016/17 prices) will be saved in 2019-20. That’s around 15% of what total expenditure might otherwise have been.

This blog is based on the House of Commons Library Welfare Expenditure and Savings Tool, available online for download.

Picture Credit: |Counting the pennies, Vicky HughestonCreative Commons Attribution 2.0 Generic (CC by 2.0)