The Treasury manages public spending within two ‘control totals’ of about equal size:
- departmental expenditure limits (DELs) – mostly covering spending on public services, grants and administration (collectively termed ‘resource’ spending) and investment (‘capital’ spending). These are items that can be planned over extended periods.
- annually managed expenditure (AME) – categories of spending less amenable to multi-year planning, such as social security spending and debt interest.
Social security and tax credits together are the biggest source of AME spending. Housing benefit is one of the larger elements of welfare spending. It is an income-related benefit to help households pay their rent. It is available to people on low incomes – from benefits or work – who rent their homes in the private- or social-rented sectors. Unlike many benefits, there is no set amount paid to an individual for housing benefit. The amount received depends on a measure of ‘eligible’ rent – e.g. local housing allowance rates in the private sector – and other household circumstances. These include household income, whether there are any non-dependants, whether there is deemed to be a spare room in the home, and the age and disability status of those in the household.
Key determinants of spending on housing benefit are household composition, employment/unemployment, earnings and rents. Working-age housing benefit is one of the elements of welfare spending that will be replaced by universal credit over the coming years. Pensioner-age housing benefit will remain separate. Currently, we produce our forecasts for the benefits affected by UC by first assuming a no-UC counterfactual (i.e. the legacy benefits continue as before) then adding the marginal cost of introducing UC. In outturn years, in order to enable monitoring of monthly spending against our forecasts, we switch to an ‘actual cost’ presentation of spending showing legacy benefit spending net of the impact of the UC rollout. These accounting switches appear as line breaks between the last actual cost and first no-UC counterfactual data points in the charts below. Our January 2018 Welfare trends report set out how we forecast spending on UC and the legacy benefits in more detail.
In our latest forecast, overall outturn spending on housing benefit was estimated to be £21.9 billion in 2017-18, with around £0.8 billion of working-age spending having been ‘lost’ to UC. We expect overall housing benefit spending in 2018-19 to total £23.4 billion, with 4.6 million recipients paid an average of £5,035 each. That would represent 2.9 per cent of total public spending and 1.1 per cent of national income.
This can be split into spending inside and outside the welfare cap – only spending associated with people in receipt of jobseeker’s allowance or equivalent households in receipt of UC is outside the cap. In our latest forecast we expect housing benefit spending subject to the cap to total £21.2 billion and spending outside the cap to total £2.2 billion in 2018-19.