Jobcentre Plus sign.

The Welfare Cap may create a “perverse incentive” for the government to park the unemployed on Jobseeker’s Allowance and fiddle jobless numbers instead of helping them into work, a new report from the National Audit Office (NAO) suggests.

The cap, which shouldn’t be confused with the household Benefits Cap, limits government spending on most social security benefits.

However, Jobseeker’s Allowance and connected Housing Benefit payments aren’t included, which the NAO says “may create an incentive for government to keep claimants on Jobseeker’s Allowance instead of encouraging claimants into work”.

State Pension and jobseeker’s payments under Universal Credit are also excluded. In total, more than £98bn in welfare spending isn’t included in the Welfare Cap.

But Tax Credits paid to those who move off out-of-work benefits and into employment ARE included in the Welfare Cap, which could encourage the government to leave claimants on Jobseeker’s Allowance rather than breaching the cap.

The current cap of £115.2bn was set at the Summer Budget last year, falling to £114.9bn by 2020/21, but was famously breached after the government was forced to abandon plans to cut working tax credits.

Similar cuts to Universal Credit will continue to go ahead, however, leaving thousands of people worse off to the tune of hundreds of pounds a year.

Shadow Work and Pensions Secretary, Owen Smith MP, branded the Welfare Cap “a political gimmick” that fails to address “underlying causes of increased spending on social security”, such as “low wages and rising rents”.

“That’s why they’ve repeatedly breached their own cap and the NAO has done us all a favour by pointing out how such politically motivated stunts can rebound on ministers and undermine policies to create secure jobs and sustainable wages.”

He told the Telegraph: “The Tories have got a history of fiddling the jobless numbers in Britain, famously boosting the numbers on Incapacity Benefit in the 1980s, and this report suggests that they may now have a perverse incentive to do so again due to the failing Welfare Cap”.

Amyas Morse, head of the National Audit Office, said: “Forecasts will always be uncertain but when spending is projected to be close to or over the cap, weaknesses in forecasts may affect policy or operational decisions.

“All departments involved should therefore move quickly to improve their processes.”