Benefit cuts 'miss savings target'

Press Association
Benefit cuts 'miss savings target'
Benefit cuts 'miss savings target'

The Government's benefit cuts have failed to deliver the expected savings in the welfare bill, a leading economic think tank has warned.

The Institute for Fiscal Studies (IFS) said welfare spending this year will be just £2.5 billion lower in real terms than it was at the start of the parliament in 2010-11 - compared to forecast savings of £19 billion.

The findings come as a further headache for Chancellor George Osborne as he prepares to deliver next month's Autumn Statement amid fears the worsening international economic outlook will add to the strain on Britain's beleaguered public finances.

In its report the IFS pointed to a series of factors behind the failure to achieve the expected reduction in welfare spending.

They include a £5 billion increase in the cost of pensioner benefits - in part the result of the ageing population but also a reflection of the more generous allowances, with pensioners receiving on average £500-a-year more.

Despite cuts to housing benefit, which were expected to produce annual savings of £2 billion, spending is now set to be £1 billion higher - a rise which the IFS said was "unanticipated".

It said the increase was the result of a faster than expected growth in the private rented sector - and faster than expected growth in private rents - combined with slower than expected earnings, which had served to push up the cost to the taxpayer.

Slower-than-expected earnings growth also meant that spending on tax credits has not come down as quickly as ministers expected - reducing costs by less than £3 billion compared to a forecast saving of £4.6 billion.

Delays to the replacement of disability living allowance with the less generous personal independence payment meant that instead of anticipated savings of £1.2 billion a year, the cost has actually risen by £1.6 billion.

The switchover from the RPI measure of inflation to CPI for the annual uprating of benefits had also failed to produce the expected £4 billion in savings, the IFS said.

"All this has important fiscal consequences," said the report's author, Andrew Hood.

"Mr Osborne wants further cuts to social security spending to help reduce the deficit. He may end up having to make cuts just to stay on track."

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