The welfare cap is a self-imposed limit on the amount that the government of the United Kingdom can spend on certain social security benefits and tax credits. The welfare cap was first introduced in the 2014 United Kingdom budget.[1] The policy took effect in 2015, and the limit for the financial year 2015–2016 was set at £119.5 billion,[2] amounting to 56% of total welfare spending.[1]
The operation of welfare cap is set out in The Charter for Budget Responsibility. The Office for Budget Responsibility (OBR) is required to report periodically on whether the cap has been met or exceeded. The OBR initially made its assessments annually in the Autumn, but since 2017 the cap is only assessed at the first Budget of a new Parliament. Welfare spending was initially required to be less than the cap every year, but since 2017 this has been replaced by a medium-term welfare cap and welfare spending is assessed for a single year chosen by HM Treasury. Following the 2017 general election the OBR made its Autumn 2017 assessment for the financial year 2021–22. The 2019 general election led to a subsequent assessment at the March 2020 budget for the financial year 2024–25[3] with the cap set at £135.4 billion for that year.[4]
In January 2022 the House of Commons approved a change to the welfare cap allowing it to qualify as one of the "fiscally neutral classification changes" which do not require approval from Parliament.[4]
The policy was a facet of the Coalition government's wide-reaching welfare reform agenda which included the introduction of Universal Credit and reforms of housing benefit and disability benefits.
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