Welfare cap will change the way cuts are made

The Sun’s report that pensioner benefits will be included in the overall cap on welfare spending highlights an interesting shift that this policy will cause.

George Osborne will set out the detail of the cap on Annually Managed Expenditure in the budget in a few weeks’ time. It will put pressure on all Work and Pensions Secretaries to keep future welfare spending under the limit, meaning there will be internal pressure within the department for cuts, rather than the battle for savings between the DWP and the Treasury that we’ve grown used to. Instead of the Chancellor bearing down on DWP with a package of cuts, the DWP will be working constantly on finding cuts that stop it reaching that AME cap.

But the pensioner benefit aspect of the story also represents a victory for Iain Duncan Smith, who is not as recalcitrant about cutting spending as some might suggest. He has had a package of welfare cuts sitting on his desk for months which include pensioner benefits.