A little recognised policy in the budget by the Chancellor George Osborne which will see a cap on the annually managed expenditure (AME) of the welfare budget has got a think tank thinking about its consequences which now warns that this could mean even deeper cuts to unemployment benefits or an attack on pensioner benefits but since the government looks to protect pensioners it will be the unemployed thrown under the oncoming train in either a tory or Labour win at the elections since new governments are committed to carrying out all policies committed in the previous term of office.
The logic behind a cap on the annually managed expenditure (AME), the part of public spending that includes social security benefits and tax credits, has been questioned by a think tank that said the policy would set pensioners and working-age people against each other over their share of the welfare bill.
The Chancellor announced the cap in the recent Budget when he said he wanted to "bring real control to areas of public spending that had been out of control". However, according to the Social Market Foundation (SMF), while working-age welfare has been the biggest element of the rise in AME in recent years, it is set to fall in the future as the economy recovers and government cuts take effect. In contrast, pensioner benefits will continue to rise rapidly as the population ages, meaning that further cuts to working age benefits are likely under a cap unless the Chancellor is planning to cut pensioner entitlements.
The SMF also said that most working-age welfare spending is closely linked to the state of the economy, so the vast majority of the recent increase in housing benefit spending would disappear when unemployment fell. This would make it almost impossible for the Chancellor to keep his promise to allow automatic stabilisers – the mechanism that allows benefit spending to go up in a recession – to operate at the same time as clamping down on AME, unless he is prepared to make deep cuts to pensioner benefits.
SMF director Ian Mulheirn said: "The Chancellor is impaled on the horns of a trilemma. He cannot simultaneously cap annual managed expenditure, allow employment-related benefits to respond to the state of the economy, and protect pensioner benefits. One of them has to give. And with pensioner benefits apparently politically untouchable, the likely result is further deep cuts to working-age welfare, despite the Chancellor's pledge to allow job-related benefits to respond to the economy."
Mulheirn questioned the reason for capping AME when significant cuts to the welfare bill had already been made without such a measure.
"The only real virtue in a cap on AME is rhetorical: it lumps together different elements of unrelated spending, which facilitates cuts to some when others rise. This serves to obfuscate rather than clarify public policy choices about the shape of the welfare state at a time when the Chancellor himself is calling for an open debate about welfare."
Source; Public Service
The logic behind a cap on the annually managed expenditure (AME), the part of public spending that includes social security benefits and tax credits, has been questioned by a think tank that said the policy would set pensioners and working-age people against each other over their share of the welfare bill.
The Chancellor announced the cap in the recent Budget when he said he wanted to "bring real control to areas of public spending that had been out of control". However, according to the Social Market Foundation (SMF), while working-age welfare has been the biggest element of the rise in AME in recent years, it is set to fall in the future as the economy recovers and government cuts take effect. In contrast, pensioner benefits will continue to rise rapidly as the population ages, meaning that further cuts to working age benefits are likely under a cap unless the Chancellor is planning to cut pensioner entitlements.
The SMF also said that most working-age welfare spending is closely linked to the state of the economy, so the vast majority of the recent increase in housing benefit spending would disappear when unemployment fell. This would make it almost impossible for the Chancellor to keep his promise to allow automatic stabilisers – the mechanism that allows benefit spending to go up in a recession – to operate at the same time as clamping down on AME, unless he is prepared to make deep cuts to pensioner benefits.
SMF director Ian Mulheirn said: "The Chancellor is impaled on the horns of a trilemma. He cannot simultaneously cap annual managed expenditure, allow employment-related benefits to respond to the state of the economy, and protect pensioner benefits. One of them has to give. And with pensioner benefits apparently politically untouchable, the likely result is further deep cuts to working-age welfare, despite the Chancellor's pledge to allow job-related benefits to respond to the economy."
Mulheirn questioned the reason for capping AME when significant cuts to the welfare bill had already been made without such a measure.
"The only real virtue in a cap on AME is rhetorical: it lumps together different elements of unrelated spending, which facilitates cuts to some when others rise. This serves to obfuscate rather than clarify public policy choices about the shape of the welfare state at a time when the Chancellor himself is calling for an open debate about welfare."
Source; Public Service
