Welfare Spending Is Set To Rise Over The Next Parliament, But So Too Are Risks Around Child Poverty And Homelessness
13th June 2024
Welfare spending is set to increase by over £20 billion a year by the end of the next parliament, driven almost entirely by rising spending on pensioners and those with a health condition. But reductions in support for renters will increase the risk of homelessness, while limits and caps on support is set to push the majority of large families into poverty, according to major new research published today (Thursday 13 June 2024) by the Resolution Foundation.
Ratchets, retrenchment and reform - the latest Resolution Foundation election briefing, funded by the Nuffield Foundation – examines how the welfare system has evolved since the financial crisis, how it is likely to change in the future, and the challenges this brings to policy makers and benefit recipients.
The report notes that the overall size of the welfare state today is bigger than it was on the eve of the financial crisis – rising from 10 per cent of GDP in 2007-08 to 11.2 in 2024-25. But beneath the modest rise lies major reforms to the welfare system, with two-thirds of working-age spending now delivered through benefits that didn't exist in 2010, and big changes in how welfare spending is spread across different groups.
Spending on the State Pension has grown the most (from 3.7 to 5 per cent of GDP), followed by disability and incapacity benefits (from 1.2 to 2.1 per cent of GDP), while spending on benefits for children and working-age adults that are not related to health or housing has fallen over the same period (from 2.8 to 1.9 per cent of GDP).
These changes reflect both caseload pressures – the number of people claiming health-related benefits increased from 7.4 million to 10.2 million between 2010 and 2024-25 – the removal of entitlement to child-related benefits, and the generosity of benefit support. For example, between 2010-11 and 2024-25, basic unemployment support increased by 27.7 per cent, compared to a 73.6 per cent rise in the basic State Pension.
Looking at all welfare changes announced since 2010, the report finds that, among households receiving benefits or the State Pension, pensioners benefited the most overall, gaining £900 on average, while working age families have lost £1,500.
The hardest-hit groups since 2010 have been out-of-work households receiving benefits, who have lost £2,200 a year on average, and large families receiving benefits (containing at least three children) who have lost £4,600 on average.
However, the most recent parliament has exhibited a different approach to the decade of cuts to working-age support that came before it. The continued rollout of Universal Credit and extensions within it for low-income workers, as well as the temporary pandemic and cost of living support worth £30 billion, have boosted incomes for households in the bottom half of the income distribution. Nevertheless, these gains have not offset the losses from social security policies enacted between 2010 and 2019.
The report notes that overall welfare spending is forecast to increase by £20.8 billion a year by the end of the next parliament (2028-29), with more than 90p of every extra £1 spent going on the State Pension and disability and incapacity benefits.
But while both of the main parties have accepted the large rise in pensioner spending by reiterating their commitment to the Triple Lock, their manifesto pledges to date imply a different approach to disability benefits, with the Conservatives pledging to cut spending by £12 billion a year.
In reality, the Foundation says, savings of this scale would be extremely challenging to achieve over the next parliament, and whoever wins will have to grapple with the underlying causes of rising disability and incapacity benefit claims, whatever is or isn’t in their manifesto.
Finally, the Foundation notes that while the focus on welfare is currently on disability benefits, other areas of the system are under considerable strain.
The roll-out of the two-child limit on support will push the majority (51 per cent) of large families into poverty by the end of the parliament, while the recent four-year freeze in Local Housing Allowance – which is set to continue over the next parliament following a one-off jump last year – saw rising homelessness in recent years, and risks doing so again in the next parliament.
The latest British Social Attitudes survey found that 73 per cent of people believed there was "a great deal" of poverty in Britain – the highest proportion recorded since 1986 when the question was first asked. But the main parties have not yet set out how they’d deal with this issue, says the Foundation.
Alex Clegg, Economist at the Resolution Foundation, said, “Britain’s welfare system has experienced a rollercoaster of ratchets, retrenchment and reform since 2010 that have created a mix of big winners and losers.
“Pensioners have benefitted most from changes to the welfare state, gaining £900 a year on average, and look set to benefit most over the next parliament thanks to the continuation of the Triple Lock. In contrast, large families receiving benefits have already lost over £4,600 a year on average, and the majority are set to fall below the poverty line by the end of the parliament.
“Welfare reform is currently focused on disability-related benefits, which is understandable given that spending is due to rise by £10 billion a year over the next parliament. But whoever wins the next election will face wider welfare challenges from homelessness, to childhood poverty.”
