This research aimed to produce indicative estimates of the long-term fiscal costs of a cohort of current benefit recipients, and investigate how this varies with benefit type and age. The future liability is the amount that the government might expect to have to pay in benefits to the people on benefit at June 2009 for the period until they reach the age of 65.
The purpose of this report is to provide information on the long-term fiscal costs of benefit receipt. The analysis estimates the future liability of benefit expenditure for the cohort of working-age clients on benefits at the end of June 2009. This analysis provides:
- detailed estimates of future liability according to estimated benefit duration (not necessarily continuous spells)
- information on how this varies with benefit type and age
- estimates that account for the impact of changing economic conditions on future liability.
This analysis looks at the people on benefit at the end of June 2009 and estimates the future liability for benefit expenditure for these people until they reach the age of 65.
The total future liability of benefit expenditure for clients who were on a working-age benefit at the end of June 2009 is estimated (in 2009 dollars) to be between $44 billion and $57 billion. The liability over the next 10 years is estimated to be between $28 and $32 billion.
Estimated payments to clients on Invalid's and Domestic Purposes benefits make up the largest proportion of the future liabilities.The effect of age on future liability is particularly pronounced for the Invalid's Benefit with people receiving Invalid's Benefit aged 25 to 34 having the highest future liability.
Three different economic scenarios were analysed, showing that over all future years a one percentage point change in unemployment rate changes the estimated average benefit duration per client by approximately one year and the estimated average future liability by 9 per cent.