Overspending ‘caused by growth of in-work poverty’

The rising number of working people living in households in poverty is causing the coalition government to spend billions more than planned on social security, according to a new TUC report.

The report compares social security spending over the course of the current Parliament with the government’s original forecast in 2010, as well as taking a longer-term look at spending on benefits over the last three decades.

Key findings

  • Total social security spending is set to be £9.2 billion a year more than originally forecast by 2014-15.
  • Rising in-work poverty, caused by real wage falls and the concentration of new jobs in low paying industries, is the main cause of unplanned spending.
  • The biggest single area of unplanned social security spending – £2.6 billion a year by 2014-15 – is on tax credits, two-thirds of which now goes to households with someone in work. The number of middle-income families receiving tax credits has almost doubled in the last five years. This is a result of falling real incomes leaving more working families in need of tax credit support – despite cuts to tax credits that have left some families thousands of pounds a year worse off.
  • The next biggest area of unplanned spending – £2.5 billion a year by 2014-15 – is on housing benefit. This is also likely to be due to rising in-work poverty as most of the increase in the housing benefit caseload since 2010 comes from families with someone in work.
  • Workers are experiencing the longest real wage squeeze in over a century, with average weekly earnings growth having trailed inflation since late 2009. As much as 80 per cent of net job creation under the coalition government has taken place in industries paying less than £8 an hour on average. Official figures show that real household disposable income per head has fallen sharply in recent years and is now back at its 2005 level.

TUC General Secretary Frances O’Grady said: 'For all its rhetoric on tackling welfare, the government is set to spend almost £10 billion a year more than it originally planned on social security payments by the end of this Parliament. This is because Britain’s living standards crisis has led to a rapid rise in the working poor. Even while tax credits are being cut, spending is going up because so many more working people are reliant on benefits to help make ends meet'.

SourceIs Social Security Spending Really out of Control?, Trades Union Congress
Links: Report | TUC press release

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Publication date: 
Dec 5 2013