The Institute for Fiscal Studies finds that the biggest cuts in the welfare system are ‘yet to come’ and that people of working age could see their benefits slashed by 23 per cent.
Britain’s benefits bill has not fallen over the past four years and will have to be cut dramatically in the next Parliament to meet George Osborne’s plans to balance the books, an influential economic forecaster has said.
The Institute for Fiscal Studies said although the Coalition has reduced spending on benefits by £16.7 billion, Britain’s ageing population and weak growth in wages has left the overall £220 billion bill “virtually unchanged”.
The think tank said that the cuts under the Coalition have been a case of “evolution rather than revolution” and that the most significant cuts are “yet to come” in the next Parliament.
It forecast that a further £21 billion worth of welfare savings will be needed in the next Parliament if cuts to government departments continue at the same rate.
The IFS said that the next government will face “difficult decisions” on whether to cut the state pension or the levels of child benefit paid to middle-class families.
If pensioners are largely protected, as Prime Minister David Cameron has hinted they will be under a Tory government, working-age people will face 23 per cent cuts in benefit payments.
Mr Cameron this week suggested that a future Conservative government will protect pensioner benefits including the state pension, TV licence and winter fuel payments.
He said that the triple-lock which ensures the state pension rises in line with earnings, prices or 2.5 per cent is part of a pledge to ensure “dignity and security in old age”.
However, the IFS found that protecting the basic state pension will cost billions of pounds.
It will already be costing £1.1 billion more by 2015/16 than if it was linked to inflation and £4.6 billion more than if it was linked to earnings.
Iain Duncan Smith, the work and pensions secretary, hailed the figures as evidence that the government has saved over £3 billion by getting people off benefits and into work.
The IFS said that spending on Job Seeker’s Allowance and Income Support will fall from £8.5 billion in 2010/11 to £5.2 billion in 2015/16.
Mr Duncan Smith said: “More people waking up every morning with the security of a regular wage and a chance of better future for themselves and their family. Not only that, it’s cutting the benefits bill too, meaning we can get the deficit down so our economy is stronger and more secure.”
The report said that, taken together, the reforms have “changed the shape of the benefits system”, with support more closely targeted on those with the lowest incomes and a move away from means-testing for pensioners.
There was evidence that the introduction of tougher sanctions has had “some success” in encouraging claimants to return to work, particularly in the case of single parents. But the payment-by-results Work Programme has “not yet delivered the forecast increases in employment entry”, said the IFS.
Forecasts suggest the roll-out of Iain Duncan Smith’s flagship Universal Credit for jobless claimants may still be incomplete by 2020 – 10 years after it was first announced – said the IFS in a report.