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Government reveals Spending Review details

Welfare spending cut, pension age to rise by 2020

Government plans for public spending were outlined in detail, department by department, in today’s comprehensive spending review. £18bn will be cut from welfare spending by 2014-15, the state pension age is to rise to 66 for men and women by 2020, and the public sector workforce is scheduled to fall by 490,000. 

George Osborne

The Chancellor, George Osborne, said: ‘We have chosen to cut the waste and reform the welfare system that our country can no longer afford.’ Mr Osborne also remarked: ‘It is a hard road, but it leads to a better future.’

Spending review: welfare reforms

The government had already pledged to cut £11bn of welfare spending by 2014-15. Today, it committed to a further £7bn saving, bringing the total reduction to £18bn. 

Restricting Child Benefit is estimated to save £2.5bn of the welfare total. From January 2013 it will no longer be paid to families with a higher rate taxpayer. There had been speculation that Mr Osborne would cut further by reducing the age limit for Child Benefit, but he confirmed today that it will continue until a child leaves full time education, at age 18 or 19.

Universal benefits for pensioners will be left unchanged, including eye tests, prescription charges, bus passes, TV licences for the over-75s and winter fuel payments.   

Education Maintenance Allowance will be ended, however, saving an estimated £0.5bn

Household welfare payments will be capped from 2013, on the basis of median earnings after tax for working households – around £500 per week by 2013.

Welfare fraud will be targeted, with the intention of saving £5bn each year. 

Pension age to increase to 66    

The chancellor confirmed that state pension age for women will be set at 65 from November 2018. State pension age will then be increased to 66 for men and women by April 2020. 

The increase is expected to affect 5.1m people. The government expects the changes to save £30bn through reduced spending on state pension between 2015 and 2025, and bring in an additional £13bn through income tax and national insurance receipts.

Public sector redundancies     

Mr Osborne admitted that the cuts will bring public sector redundancies and that the numbers employed are expected to fall by 490,000 over four years. He said that much of this would be accounted for by natural turnover, leaving posts unfilled as they become vacant. 

Television licence freeze

The BBC has assumed responsibility for funding the World Service and has also accepted a licence fee freeze for six years. This is seen as a 16% saving in its budget.

Rail fares to rise   

Increases in regulated rail fares, mostly paid by commuters, are currently capped at the rate of inflation as measured by the retail prices index (RPI) plus 1%. From 2012, the limit will rise to RPI plus 3%.  

Have your say

What do you think about the spending review? How will today’s announcements and cuts affect your life? Do you think the government should have made different decisions? Have your say on all aspects of the Spending Review on the Which? Conversation.

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