Welfare cap: leaked memos reveal risk of budget breach

The Coalition is in danger of breaching its self-imposed welfare cap as more people move off Jobseeker's Allowance and onto sickness benefits, leaked government documents have revealed.

The internal memos, seen by the BBC, suggest that Employment and Support Allowance (ESA) costs, intended for people who are unable to work because of sickness or disability, are rising with few cost-cutting options left available.

The 2015-16 welfare cap, excluding state pension and some unemployment benefits, was set at £119.5bn by MPs in March.

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But the leaked documents say ESA is "one of the largest fiscal risks currently facing the government", with the cost projected to rise by nearly £13bn between now and 2018-19.

The papers suggest the main reason for the rising cost is an increasing number of people moving from Jobseeker's Allowance to ESA, partly because claimants are less likely to face sanctions for misconduct on ESA.

A key aim of the sickness benefit is to get people off welfare and into work, but the documents say the severity of claimants' illnesses and disabilities have been underestimated, meaning people are staying on the benefit longer than expected.

A range of cost-cutting options were offered in the documents, but the authors concluded that there appears to be "not much low-hanging fruit left". One memo said: "This leaves us vulnerable to a breach [of the cap]."

Private firm Atos, which carries out health assessments for the government, has agreed to end its contract early, but the documents say the new contractor, due to be appointed in early 2015, is expected to cost roughly "three times as much" as Atos's £100m annual deal.

Ministers, who say welfare spending will come in under the cap, will have to give an explanation to Parliament if the limit is breached and ask MPs to approve additional spending.