Oxfam, Shelter, Barnardo’s, NCVO and other leading charities have raised concerns with government that a new overall cap on welfare spending could bring “compound hardship for many individuals and families”.

In a letter written to the government ahead of the budget, charity leaders have highlighted their fears that capping annually managed expenditure (AME) will leave people at risk of poverty unless complementary action is undertaken to address underlying drivers of social security spending.

The charities are particularly concerned that disabled people will bear the burden of failures to address unemployment, low pay, housing and childcare costs.

The letter, addressed to the economic secretary but also received by the Chancellor of the Exchequer, the chief secretary to the treasury, the minister for civil society and other relevant officials, said: “As major voluntary organisations, we work with and on behalf of millions of people whose lives may be affected by further changes to social security policy - including families with children, older people, people with disabilities, and those who struggle with their housing costs.”

Annually managed expenditure is spent on programmes that are demand led, such as welfare, tax credits or public sector pensions.

Blunt measure

The charities believe the AME cap is a “blunt measure” that is likely to drive short-term decision making and arbitrary benefit cuts.

The group, which also included Age UK, Child Poverty Action Group, Crisis, Mind, and Scope, said it had been considering the potential impact of the cap on people’s lives, while recognising the government’s policy objective to bring a greater level of control to AME.

The letter states that the Institute for Fiscal Studies highlighted last week that the cap itself would not make for ‘better policy making’, saying that it would depend on how expenditure was managed as a result of the cap.

The charities recommend measures to help to reduce the demand for benefits over the longer term. These include supporting older workers and people who face barriers in the labour market to find work, increasing targeted support for families and children, and building more affordable housing.

Paul Farmer, chief executive of Mind, Sir Stuart Etherington, chief executive of NCVO, and Campbell Robb, chief executive of Shelter, were among the charity figureheads who signed their names to the letter.

It concluded: “We strongly recommend that the government consults further before proceeding to implement its proposed cap.

“However, if the government decides to proceed with the cap as it stands, it should be set at an appropriate level that enables these medium and longer term policy actions to be implemented in the early years of the cap, without needing to make arbitrary cuts in the short term.”

Last week NCVO announced a research project that looks into the effects of recent welfare reforms on charities and their beneficiaries.

The research will present examples of how charities are adjusting to changing demands, as well as providing a platform to share examples of best practice.