THE BLOG

How Can the Coalition Have 'Saved' £21billion on Welfare, If Spending Did Not Fall?

27/04/2015 11:51 BST | Updated 25/06/2015 10:59 BST

Conservative budget plans depend crucially on the £12 billion they state they will save from the annual welfare budget. They ask us to trust that they will do this because of the savings made in the last Parliament. On Newsnight, David Cameron stated that "the £12 billion is only half of the £21 billion that we saved on the welfare budget in this Parliament".

I was puzzled by this, and not just be the fact that £12 billion is well over half of £21 billion. The DWP's Benefit and Caseload tables showed no evidence of a big reduction in welfare costs. These show that total "GB Benefits and Tax Credits" actually rose during the last Parliament - from £202.5 billion in 2010/11 to £207.8 billion in 2014/15 (in real terms using 2014/15 prices).

Now that does include pensions and other pensioner benefits, which all the political parties have promised to maintain. But even the figure for benefits and tax credits to people of working age and children seems to have risen from £91.9 billion in 2010/11 to £93.6 billion in 2014/15. That is a rise of £1.7 billion. There is no trace of a reduction of over £20 billion.

I wondered if the Conservatives had simply made up their figure. But, no, it turns out the claims do have a very authoritative source, and come directly from analysis by the Office for Budget Responsibility (OBR). The OBR calculated the saving from every budget change and did indeed calculate the total saving - though based on projections for the financial year to March 2016 - at £21 billion.

The Institute for Fiscal Studies (IFS) has studied the Conservative claim and, though they dispute the £21 billion figure, do find "changes to the benefit system that mean spending in 2015-16 will be £16.7 billion lower than it would otherwise have been".

The wording is interesting, though. Spending is stated to be less than "it would otherwise have been" but not lower than it was in previous years. Indeed the IFS go on to note that "real terms benefit spending, however, is forecast to be almost exactly the same in 2015-16 as it was in 2010-11". Thus savings in some areas were balanced by increases in others, like housing benefit (as rents rose) and in an increase in payments to the sick and disabled.

Can it really be called a saving, though, if spending has not been reduced? It feels a bit like when you come back with your shopping, having "saved" £40 but having spent the same as you always do. More seriously if the Coalition savings did not lead to any actual reduction in the welfare bill, can the Conservatives use their track record to justify that they will save a further £12 billion?

Data note:

My figures for benefit & council tax spending for those of working age and children is calculated after removing Council Tax Benefit, which was in 2013/14 transferred to the local government budget. My thanks to Tony Travers for clarifying the change in Council Tax benefit funding.