Chancellor eyes up welfare for fresh cuts

The government has refused to rule out further cuts to disability benefits, after fresh plans to curb spending were announced in this week’s budget.

The chancellor, George Osborne, announced there would be a new limit on a large part of what is known as annually managed expenditure (AME).

AME is spending that rises or falls depending on outside factors, such as the state of the economy, accounts for about half of all public spending, and includes most of the welfare budget.

Osborne told MPs in his budget statement that the new limit would “bring real control to areas of public spending that had been out of control”.

Some areas of AME, including jobseeker’s allowance and employment and support allowance, will be protected from the new limit, because their rises and falls act as “automatic stabilisers” for the economy in recession and periods of high growth.

Neither the Treasury nor the Department for Work and Pensions (DWP) could give any details on which other disability benefits could face limits.

But the Treasury refused to rule out cuts to spending on personal independence payment (for working-age disabled people) and disability living allowance (for older people and disabled children).

The Treasury was also unable to explain how AME limits could work, particularly with welfare spending.

Budget documents state that the government has already acted to “manage AME spending pressures” through its welfare reforms, and that “as a result, working-age welfare expenditure is projected to fall in real terms” between 2010 and 2015.

They say there is a need for a “more robust public spending framework”, so the government will introduce “a firm limit on a significant proportion of AME, including areas of welfare expenditure”.

A Treasury spokesman said that “no decisions have been taken on the specific areas which will be included within scope of the new limit”, although further details would be announced in the spending review for 2015-16, due on 26 June this year.

A DWP spokesman refused to comment on the chancellor’s plans, and said: “You would have to talk to the Treasury. We haven’t got anything to add.”

Osborne also announced in his budget statement that the cap on lifetime eligible social care costs would be set at £72,000 – rather than the £75,000 previously announced, but still considerably higher than the cap recommended by the Dilnot Commission in 2011.

And he said the cap would now be introduced in April 2016, rather than in 2017.

But he provided no details on how working-age disabled people would be expected to contribute to their care costs.

Health secretary Jeremy Hunt announced last month that disabled people who develop eligible care needs before they turn 18 – Dilnot had recommended 40 – would receive free lifetime care, while there would be a lower cap on lifetime care costs for people of working age who develop support needs after 18 but before retirement age.

21 March 2013