The welfare cap is a limit on the amount that government can spend on certain social security benefits and tax credits. The cap aims to better control spending in an area that can be difficult for government to control. Around half of total welfare spending is included in the cap. It excludes pensions and those payments most sensitive to the economic cycle. The cap was first introduced in Budget 2014 and the Office for Budget Responsibility (OBR) – the UK’s fiscal watchdog – first reported on whether the cap had been met or exceeded alongside Autumn Statement 2014. The operation of welfare cap is laid out in the Charter for Budget Responsibility – the document that sets government policy and targets for the public finances.
