Select Committee on Social Security Minutes of Evidence

Supplementary memorandum from the Department of Social Security

  1.  At the hearing on 20 July 1999 the Committee requested a note on discretionary increases in social security expenditure.

  2.  Identifying separately non-discretionary and discretionary elements in the forecasts of future expenditure is a complex task. In one sense each component of social security spending was discretionary at the time it was introduced. Some policy changes were introduced many years ago and have still not matured. These policies themselves may be the subject of later changes which modify the path of spending. (For example, while SERPS was introduced in 1978 it is still maturing and changes made in 1988 and 1995 to the rates of accrual are just beginning to feed through into the profile of expenditure). Indeed, although many would classify annual adjustment for inflation as non-discretionary, in law the Secretary of State is required to make discretionary judgements on uprating each year.

  3.  However, changes in policy are separately costed at the time they are decided. In 2001-02 the following are the main welfare policy changes which increase expenditure (or revenue foregone):
(a)  The introduction of WFTC £2.1bn;
(b)  Child Benefit in Budgets 1998 and 1999 £1.2bn;
(c)  Associated changes in income-related benefits for children £0.5bn;
(d)  Minimum Income Guarantee for Pensioners £0.5bn;
(e)  Winter Fuel Payments£0.8bn;
(f)  Abolition of the National Insurance "entry fee" in Budget 98 £1.4bn;
(g)  Alignment of NI LEL with Single Person's Tax Allowance £1.8bn;
(h)  Introduction of the Children Tax Credit in Budget 99 £1.4bn;
(i)  Introduction of the 10p starting rate of Income Tax £1.8bn.

  In addition the Government is spending over £5bn on the New Deal over the lifetime of this Parliament.

23 August 1999

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