Cap on welfare spending could be breached - BBC

The BBC is reporting this morning that the government's welfare cap - introduced in the 2014 Budget - could be breached as a result of rising Employment and Support Allowance (ESA) costs. A combination of a high number of claimants, and existing claimants getting the payments for longer were mentioned as factors, according to the leaked documents. The government has rejected the suggestions.

ESA payments are currently estimated to cost the government £10 billion a year, and Incapacity Benefit (which ESA is replacing) still accounts for a further £1.2 billion. The cap itself is currently set at £118 billion for this year and will be almost £120 billion by 2015. ESA's share of that gap is already projected to grow over the next few years.

The welfare cap doesn't directly stop a government spending over the limit, but it does impose requirements under the Charter for Budget Responsibility, such as seeking parliamentary approval for a rise in the cap level.

The cap also doesn't include all aspects of 'welfare', as we discuss in our spotlight on welfare spending. 55% of spending on benefits, pensions and tax credits are included in the cap: the State Pension and Jobseeker's Allowance are the notable exceptions.