Government "could breach its own welfare spending cap"

Leaked internal documents have revealed that the government could breach its self-imposed cap on welfare spending as a result of the cost of the main sickness benefit.

The memos suggest Employment and Support Allowance (ESA) costs are rising with few cost-cutting options.

In March, MPs agreed a 2015-16 welfare cap of £119.5bn, excluding the state pension and some unemployment benefits. The Treasury said it was "confident" of remaining within the cap, saying delivery of ESA was "back on track".

A Department for Work and Pensions (DWP) spokesman said the spending projections were "spurious scenarios" based on no action being taken: "we've taken action and will ensure we do not breach the welfare cap. Speculation to the contrary is nonsense," he said.

The cost of ESA is projected to rise by £13.3bn between the current financial year and 2018-19, and is "one of the largest fiscal risks currently facing the government".

According to the leaked documents the costs are rising because:

  • There is an increased number of claimants, caused by people moving off Jobseeker's Allowance and on to ESA, this is because ESA has fewer sanctions - when someone's benefit is stopped for misconduct - than Jobseeker's Allowance
  • The severity of ESA claimants' illnesses and disabilities has been underestimated - meaning people are staying on the benefit longer than expected
  • Problems with the private firm Atos, which has carried out benefit health assessments for the government
  • Ministers said the fact more than 700,000 people were waiting for an assessment for ESAwas due to Atos, which has agreed to end its contract early. But the new contractor - due to be appointed in 2015 - is expected to cost roughly three times the £100m annual deal with Atos.

Further information is available here.