Earlier last week I voted in favour of an overall cap on social security spending. This measure has understandably provoked strong feelings from many quarters, so I've decided to set out why I voted as I did.
The cap won't lead to automatic benefit cuts
There has been some confusion between the overall spending cap and the individual benefit cap which came into force last September. The latter has an automatic effect on a single person whose total weekly benefit income reaches £350, and a couple or anyone with children whose income reaches £500.
Not unreasonably, some people assumed that the overall spending cap would work in a similar way. For example they imagined that if the cap was breached a few weeks before the end of the financial year, claims might be refused or cuts made to particular benefits.
Let me be clear - this is not the case. The overall spending cap does not lead to any automatic benefit cuts.
How the cap would work in practice
The overall cap is in fact based on existing forecasts for welfare spending - which increase year-on-year - and so doesn't amount to a cut. A future Labour government would be able to amend this cap as it sees fit.
There are also important exemptions: the state pension and jobseeker's allowance are not included, and neither is Housing Benefit for those claiming the latter.
The Charter for Budget Responsibility, which was what we were actually voting on, states that in the event of the overall cap being breached, the secretary of state for Work and Pensions would have to lead a debate in the commons on a vote-able motion, giving an assessment of the reasons for the breach. He or she could then propose one of three options:
- Explain what steps they propose to take to get spending back into line. This could involve cuts to some benefits, but the wording equally allows for proposals for other action to reduce spending.
- Increase the cap. For example if there had been an unexpected increase in the birth-rate, increasing claims for child benefit, it would be perfectly reasonable to raise forecast spending.
- Explain why a breach in the cap is justified. For example it might be argued that to try to cut some kind of benefit spending would only produce a rise in public spending elsewhere.
Different governments - different decisions
Now of course what is proposed depends on which party is in government and whether they can command a majority for their preferred course of action.
Another tory government may well see cuts in some benefits as appropriate. But as we have seen in the last four years, there is nothing to stop them making further cuts, without an overall spending cap being in place (although ironically if the cap had been in place for the last four years, Iain Duncan Smith would have to have kept coming back to explain why spending was going up, as many of his schemes are failing to deliver the promised savings).
A Labour government could make different decisions, including explaining to the public at the time of the vote why spending more than the forecast is necessary.
Labour would tackle the root causes of spending
I believe that introducing a cap is the right thing to do, not because I want to penalise those on benefits, but because Ministers should be forced to address any policy failings that lead to a rise in social security spending. As Ed Miliband said when he first proposed a cap last year, a Labour government would control welfare spending not by cutting benefits but by tackling the root causes of spending.
We need to introduce a compulsory jobs guarantee to get people back to work. We need to tackle low wages so there is less need for people to fall back on tax credits. And we need to reform the current 'Fit for Work' test, so that those who can't work get financial support, but those who can are properly helped to do so.
Perhaps most importantly we need to control the rising cost of housing benefit. Under the Office for Budget Responsibility's current forecasts, spending on this will increase from £19.9 billion in 2012-13 to £24.2 billion in 2018-19. This is clearly unsustainable, and the only way this can be brought under control is by addressing our chronic shortage of affordable housing. A future Labour government will build 200,000 homes a year by 2020.
The tory and liberal democrat coalition are determined to demonise recipients of welfare. In contrast, Labour believes that the way to deal with rising welfare spending is tackle its root causes. An overall social security spending cap will help us do this, and that's why I supported it this week.
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