Welfare Cap — Charter for Budget Responsibility — 26 Mar 2014 at 15:17

The majority of MPs voted to cap the overall amount the state spends on welfare each year. The level of the cap is to be set each Parliament and will cover a five year period. A breach of the cap will prompt a debate in the House of Commons.

The March 2014 budget set the welfare cap for 2015-16 to 2018-19 at the Office for Budget Responsibility’s forecast for spending within the scope of the cap as at that time: £119.5bn for 2015-16 rising to £126.7bn for 2018-19^[1]

Annex A to the 2014 budget document^[1] lists what is included in the cap and what is not. Jobseeker's Allowance and its passported Housing Benefit is excluded (as are their replacements under Universal Credit). The state pension is also excluded.

The following motion was approved by the majority of MPs in this vote:

• That the modified Charter for Budget Responsibility, which was laid before this House on 19 March, be approved.

Under Section 1 (1) of the Budget Responsibility & National Audit Act 2011, the Government is required to prepare a document, to be known as the Charter for Budget Responsibility (“the Charter”), relating to the formulation and implementation of fiscal policy and policy for the management of the national debt.

The following statements on objectives and mandates were contained within the approved charter:

The Treasury’s objectives for fiscal policy are to:

• ensure sustainable public finances that support confidence in the economy, promote intergenerational fairness, and ensure the effectiveness of wider Government policy; and
• support and improve the effectiveness of monetary policy in stabilising economic fluctuations.

The Treasury’s mandate for fiscal policy for this Parliament, announced in the Budget on 22 June 2010, is:

• a forward-looking target to achieve cyclically-adjusted current balance by the end of the rolling, five-year forecast period.

At this time of rapidly rising debt, the Treasury’s mandate for fiscal policy is supplemented by:

• a target for public sector net debt as a percentage of GDP to be falling at a fixed date of 2015-16, ensuring the public finances are restored to a sustainable path.

To ensure that expenditure on welfare remains sustainable, the Treasury’s mandate for fiscal policy is further supplemented by:

• the cap on welfare spending, at a level set out by the Treasury in the most recently published Budget report, over the rolling five-year forecast period, to ensure that expenditure on welfare is contained within a predetermined ceiling.

Unlike the other objectives the latter point on the welfare cap was not contained within the previous charter published in April 2011.

Details on the operation of the welfare cap are provided in March 2014 version of the charter.

The cap on overall welfare spending is distinct from the cap on the maximum amount a household can claim in benefits, the latter being known as the "benefits cap".

• [1] March 2014 Budget documents

Debate in Parliament | Source |