Monday, 13 December 2010
Benefits reform - it isn't easy
(Click on the table for a larger presentation)
Last fiscal year, social expenditure in the UK amounted to £141 billion. You might think that this is a monstrously large figure in desperate need of being reduced.
It isn't so easy. At least half of it goes on pensions expenditures (state pension, pension credits and winter fuel payments). Housing benefit takes up around £20 million. Everything else is, comparatively speaking, small change.
Benefits expenditure has also been growing rapidly in nominal terms. Since FY03, most benefits have increased by well over 50 percent. Even allowing for the embedded inflationary component, this is an astonishing rate of growth.
The central problem is population ageing. Within the next 15 years, pensions expenditure will start to rise very sharply. At the same time, the number of active workers available to pay taxes and finance this expenditure will fall.
Even if the government hauls back expenditure on non-pension items such as housing benefit, the growth of age-related expenditures will quickly eat up those savings.
Benefits reform - good luck with that.