Housing benefit could be cut by over 10% in George Osborne’s July Budget as the government attempts to deliver its commitment to reduce welfare spending by £12 billion in two years.
The Institute for Fiscal Studies said today that the pledge to protect child benefit from the social security cuts means HB, along with tax credits and disability/incapacity benefits, would “most likely” take the biggest hit.
Carl Emmerson, IFS deputy director, explained: “One area where the Conservatives’ manifesto commits to make cuts is in social security spending (outside of protected spending on state pensions and universal pensioner benefits). But finding the sought after £12 billion of cuts in just two years will not be easy.
“Cuts of this scale amount to almost 10% of unprotected benefits. Finding such a reduction without cutting child benefit, which has been pledged this week, would mean that even more significant cuts would likely be required to spending on one or more of tax credits, housing benefit and disability & incapacity benefits.”
Emmerson also suggested that the Department for Communities and Local Government was at risk from the chancellor’s spending cuts, which could have significant implications for future housebuilding programmes.
He said: “To meet its overall spending target, even delivering the £12 billion of cuts to social security spending would still leave the government needing a slight acceleration of cuts to departmental spending, compared to what we have seen since 2010–11.”
Emmerson added: “These cuts in departmental spending are to be far from evenly spread. Spending on overseas aid and the NHS is set to continue increasing in real terms, while schools’ spending per pupil is to be protected in cash terms. As we set out in our analysis of the main parties’ manifestos prior to the general election, this requires cuts elsewhere averaging 15.3% (or £30.0 billion) over the three years between 2015–16 and 2018–19.
“In other words two years of overall spending being cut by 1% a year, followed by a year in which overall spending is frozen, quickly becomes a 5.4% a year cut, for three years, for a swathe of public services. That would see a cumulative cut to these other unprotected departments over the eight years from 2010–11 of 32.9%.
“These unprotected areas include spending by the Ministry of Defence, the Home Office, the Ministry of Justice, the Department for Communities and Local Government, the Department for Business, Innovation & Skills, and the Department for Transport.
“Protecting defence from any further real cuts – which would still leave its budget falling further as a share of national income – would increase the cuts elsewhere over the next three years to 18.7%, and the cuts over the eight years from 2010–11 to 36.9%.”