Government “could breach its own welfare spending cap”

19 June 2014

Leaked internal documents have revealed that the government could breach its self-imposed cap on welfare spending as a result of the cost of the main sickness benefit.

The memos suggest Employment and Support Allowance (ESA) costs are rising with few cost-cutting options.

In March, MPs agreed a 2015-16 welfare cap of £119.5bn, excluding the state pension and some unemployment benefits. The Treasury said it was “confident” of remaining within the cap, saying delivery of ESA was “back on track”.

A Department for Work and Pensions (DWP) spokesman said the spending projections were “spurious scenarios” based on no action being taken: “we’ve taken action and will ensure we do not breach the welfare cap. Speculation to the contrary is nonsense,” he said.

The cost of ESA is projected to rise by £13.3bn between the current financial year and 2018-19, and is “one of the largest fiscal risks currently facing the government”.

According to the leaked documents the costs are rising because:

There is an increased number of claimants, caused by people moving off Jobseeker’s Allowance and on to ESA, this is because ESA has fewer sanctions – when someone’s benefit is stopped for misconduct – than Jobseeker’s Allowance
The severity of ESA claimants’ illnesses and disabilities has been underestimated – meaning people are staying on the benefit longer than expected
Problems with the private firm Atos, which has carried out benefit health assessments for the government
Ministers said the fact more than 700,000 people were waiting for an assessment forESA was due to Atos, which has agreed to end its contract early. But the new contractor – due to be appointed in 2015 – is expected to cost roughly three times the £100m annual deal with Atos.