Benefits

The Liberal Democrat manifesto published today includes commitments to increase all rates of income tax by 1 percentage point as well as cancelling a number of significant benefit cuts and reversing others. In this observation we provide an overview of these proposals and compare them to the income tax and benefit proposals published by Labour yesterday.

You might have a different set of objectives when choosing how to uprate the state pension, and different objectives could lead to different choices. But whatever your objectives, neither the triple lock nor the double lock is the right answer.

Next week will see the introduction of significant cuts to the generosity of two parts of the working-age benefits system. These will affect some new recipients of employment and support allowance, and any family receiving tax credits or universal credit who has either a newly born first child or a newly born third or subsequent child. The restriction to new claims or new births means that the changes will not result in existing claimants seeing their benefit income fall. But in the long run, these are substantial cuts: together they are expected to reduce government spending by over £5 billion a year in the long run. This observation discusses these changes.

On Tuesday afternoon MPs in the House of Commons will debate the recent report by the Work and Pensions Select Committee on “intergenerational fairness”. This argued that triple lock indexation of the state pension should not continue beyond 2020 and pointed out that, for a given amount of spending on the state pension, there is a trade-off between the level of the state pension and the state pension age. This observation uses projections from the Office for Budget Responsibility to quantify this trade-off.

A lower cap on the total amount of benefits that households can receive comes into force tomorrow, affecting four times as many households as the previous benefit cap. Like the previous cap it will apply to out-of-work households of working age (with some exemptions, mainly due to disability). The cap will now be £23,000 a year in London and £20,000 elsewhere (there are lower caps for single adults without children set at £15,410 in London and £13,400 elsewhere). This compares to £26,000 nationwide under the previous cap, which has been in place since 2013. In this observation we look at the implications of a lower cap for government spending, the impact on the households affected, and how they might respond.

IFS Director Paul Johnson writes in The Times.

IFS Deputy Director Carl Emmerson writes for The Times Red Box.