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 bigger 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 – 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 a spare room in the home, and the age and disability status of those in the household.
Housing benefit is one of the elements of welfare spending that will be replaced by universal credit over the coming years. Since universal credit is currently at an early stage of its rollout, we currently produce our forecasts by assuming that housing benefit and the other legacy benefits continue being paid as before, then we add or subtract an amount to reflect the difference between universal credit and the six benefits and tax credits that will be replaced.
In our latest forecast, we expect housing benefit spending in 2016-17 to total £23.0 billion, with 5.0 million recipients paid an average of £4,700 each. That would represent 3.0 per cent of total public spending, and is equivalent to £800 per household and 1.2 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 is outside the cap. In our latest forecast we expect housing benefit spending inside the welfare cap to total £21.4 billion and spending outside the welfare cap to total £1.6 billion in 2016-17.