Annex B: Trends in benefit expenditure from 2000–01 to 2007–08
Figure 37 Benefit expenditure by objective (real terms, 2006–07 prices)
This chart shows how expenditure on benefits relates to the Department for Work and Pensions’ objectives.
Link to long description for Figure 37: Benefit expenditure by objective (real terms, 2006–07 prices) [D]
Notes
- Expenditure in 2005–06 reflects the latest estimate of outturn, and not the amounts voted by Parliament.
Figure 38: Numbers in receipt of key benefits
This chart shows how many people receive each of seven key benefits.
Link to long description for Figure 38: Numbers in receipt of key benefits [D]
Notes
- The chart shows all benefits with a caseload of at least one million in any year, except Winter Fuel Payments (where caseload is similar to Basic State Pension in all years) and free TV licences for the over-75s (where expenditure is relatively small and the main drivers are simply the cost of the TV licence and the number of people over 75).
- Beneficiaries may receive more than one benefit at a time.
- Incapacity Benefit includes credits-only cases. Most Incapacity Benefit credits-only cases are inreceipt of Income Support.
Analysis of benefit expenditure by Departmental objective
All expenditure figures discussed in this section are in real terms (2006–07 prices).
Figure 37 (benefit expenditure) presents information according to the four benefit expenditure-related Departmental objectives in the Department’s Public Service Agreement. Since it is possible to receive more than one benefit at a time, Figure 38 simply shows numbers of recipients for a range of key benefits.
More detail on medium- and long-term benefit expenditure is published on the Department’s website at www.dwp.gov.uk/asd/asd4/expenditure.asp.
Main trends
Slow overall growth driven by policy changes and demographics
From the transfer of Child Benefit to HM Revenue and Customs in 2003–04 to the end of the forecast period, Department for Work and Pensions benefit spending is expected to rise by an average of less than 1 per cent a year in real terms. Growth is driven in particular by the introduction of Pension Credit in 2003–04, age-related payments in 2004–05 and 2005–06 and the extension of the payment period for maternity benefits in 2007–08. In addition, longer life-expectancy increases caseloads for pensioner benefits throughout the period.
Offsetting these effects is the transfer of Income Support and Jobseeker’s Allowance child amounts to HM Revenue and Customs tax credits, with spending of £4.3 billion in 2002–03 reducing to zero in 2007–08.
Contributory benefits account for over half of the Department’s benefit spending, and income-related benefits a further third. The remainder comes from non-contributory, non-income-related benefits, principally disability and carer benefits and the Winter Fuel Payment.
Children
Department for Work and Pensions spending falls to zero in 2007–08 as HM Revenue and Customs introduces Child Tax Credit.
Department for Work and Pensions spending on children first fell significantly in 2003–04 with the transfer of Child Benefit (then worth nearly £10 billion in real terms) to HM Revenue and Customs. The remaining expenditure (on child elements of Income Support and Jobseeker’s Allowance) is gradually migrating to Child Tax Credit, which does not feature in this report as it is administered by HM Revenue and Customs. Migration is due to be completed during 2006–07, so that the Department’s spending on children is zero from 2007–08 onwards.
People of working age
Spending stable at just over £30 billion a year in real terms; most spending is through income-related benefits and Incapacity Benefit.
Main reasons for benefit receipt among working-age people are unemployment, lone parenthood and sickness or disability. Although unemployment has risen recently, it is still relatively low – benefits for unemployed people account for only 13 per cent of all working-age spending in 2006–07. Lone parent benefits account for a further 23 per cent and incapacity-related benefits113 36 per cent. The remainder is made up principally of bereavement, carer and maternity benefits. Overall, income-related and incapacity-related benefits amount to
90 per cent of all working-age spending.
Declining caseloads in Income Support (especially lone parents) and Incapacity Benefit contribute to falling spending on these benefits in forecast years. Working-age recipients of Housing Benefit and Council Tax Benefit, too, have begun to fall, though spending is rising as rents and council tax tend to rise faster than prices.
Among the smaller benefits, Statutory Maternity Pay jumps significantly in 2007–08 as a result of extending the payment period from 26 to 39 weeks.
People over pension age
Increasing spending reflecting an ageing population and new spending directed at retired people; spending over £70 billion in 2006–07
Expenditure on people over pension age is growing at 3.3 per cent a year on average over the period shown. Significant factors here have been the introduction of Pension Credit in 2003–04, and the linking of uprating to earnings rather than prices, as well as age-related payments in 2004–05 and 2005–06. In 2001–02, above-inflation uprating of the Basic State Pension – at £45 billion this year, by far the largest benefit – also contributed to growth.
Increases in the population over pension age, better contribution records for women and growing entitlements to the State Second Pension further influence the rate of growth. Overall, however, spending on people over pension age remains stable at around 6 per cent of GDP.
Disabled people and carers
Spending growing steadily as Disability Living Allowance progresses towards maturity; spending over £15 billion in 2006–07
Disability and carer benefit expenditure grows by 2.3 per cent a year on average over the period shown, rising to 2.9 per cent in forecast years. The main factor
is the maturing of Disability Living Allowance, where caseloads and average awards are still growing. This has a
knock-on effect on the Carer's Allowance caseload, which in turn is also driven upwards by reforms including the abolition of the upper age limit for claiming the benefit.
Attendance Allowance is also growing after a period of relative stability. The impact of initiatives by The Pension Service and local authorities are believed to be factors here.