Details on the expenditure side will not be released until November 24.
The full elimination of this benefit once a certain income threshold is reached implies very high effective marginal tax rates right at the threshold. However, the government views the simplicity of the reformed scheme as a higher priority than avoiding such “cliff effects.”
With the new reductions, changes to social benefits now account for 25 percent of the reduction in total primary expenditure, up from 15 percent in the June budget. The costing of savings from reductions in social benefits was vetted by the newly established independent Office for Budget Responsibility. The OBR will also take into account the effect of the revised spending plans on its economic growth projections when it next updates its forecasts. However, staff does not expect the Spending Review to result in large growth revisions, as it was largely in line with expectations.