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Spending Review: Welfare Cap Breach Likely

Spending Review: Welfare Cap Breach Likely

Whitehall is making plans for a Commons vote on George Osborne's welfare cap within a month, Sky News understands, in the clearest sign that the Chancellor has missed his self-imposed welfare cap.

The Treasury has struggled to alleviate the immediate £4.4bn cuts to tax credits this April, to provide a better transition to the Government's aim of a "low welfare, low tax, high wage economy".

Any slowing down of this year's planned cut would have to be made up for by welfare cuts in other areas such as child benefit or housing benefit.

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Sky News understands the additional cuts to housing benefit are relatively modest in scope, in the hundreds of millions per year and nowhere near sufficient to mitigate a multibillion gap.

The problem arises because Mr Osborne, in addition to making sharp welfare cuts, chose to push down the welfare cap to the levels of welfare spending forecast in July by the Office of Budget Responsibility - £115bn in the 2016/17 financial year.

This means there is no wriggle room for a significantly more generous phasing of tax credits in the coming year without busting the cap.

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The OBR assesses compliance with the welfare cap under the Charter for Budget Responsibility at every Autumn Statement.

The policy was designed as a trap for Labour, but the Chancellor would appear to have been caught in it himself.

"It'll be breached ... he's not going to get it for next year," said one Westminster source.

In the event of a breach, the Government is obliged to hold a vote in the House of Commons within 28 days.

Such a vote is required if the cap is exceeded for policy reasons, or if there is a change in the definition of which benefits contribute to the cap.

Sky News understands the Government is trying to find a date for a vote in a packed Commons schedule.

Carl Emmerson of the Institute for Fiscal Studies said: "Back in July the Chancellor decided he wanted to cut £12bn off welfare and he lowered the level of the welfare cap so he's got no wiggle room against that."

:: Watch a special programme on the Chancellor's Spending Review and Autumn Statement from 11am on Sky News.