Welfare spending at £20.1bn because of virus crisis

WELFARE SPENDING has risen by £20.1 billion in the past year, according to a report by the Office for Budget Responsibility (OBR).

The rise in 2020-21 has been dominated by higher Universal Credit spending, with the number of individuals and households receiving the benefit almost doubling this year, the report found.

This rise of £20.1bn is equivalent to 1.6 per cent of gross domestic product (GDP), according to the OBR – which represents the largest single-year jump in four decades.

But at 11.8 per cent of GDP overall in 2020-21, welfare spending falls short of the levels it reached between 2009-10 and 2012-13 as a result of the financial crisis.

Spending on Universal Credit and the predecessor benefits it replaces explains £15.1bn of the overall £20.1bn rise in welfare spending, according to the report.

This has been driven by the effects of the coronavirus crisis, which caused a massive increase in the Universal Credit caseload in the initial weeks of the pandemic.

The OBR’s welfare trends report does not cover the costs of the coronavirus job retention scheme (CJRS) or the self-employed income support scheme (SEISS).

Both schemes cost £79.7bn in 2020-21, which is equivalent to an additional 3.8 per cent of GDP of welfare-like spending, according to the report.

It said that adding this spending to the conventional definition of welfare spending in the UK would take the total to well above anything that has ever been seen in the post-war period.

This comes weeks after reports the Office for Budget Responsibility predicts that borrowing will hit a peacetime high of £355bn in 2020-21.