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No escape from benefit cap for 82% of affected households

12 March 2019

The Work and Pensions Committee calls on Government to take the 82% of households currently affected by the benefit cap that simply cannot escape it, out of its scope.

It says the cap must apply only to those DWP has assessed as capable and expected to look for work, after evidence shows only 18% of those currently hit by it fall into that category.

It also finds that the cap will cut more deeply under Universal Credit, where it can eat into all of a household's income (not just housing costs as in the existing system), including into money meant for children or people currently too ill to look for work.

When the cap was first introduced, in 2013, the Government claimed three aims for it: increasing incentives to work; introducing greater fairness between those on out-of-work benefits and taxpayers in employment; making financial savings and incentivising behaviours that reduce long-term dependency on benefits. The cap was reduced in 2016 on the basis of “even greater fairness” and to “further improve work incentives for those on benefits”, to “build on the successes of the existing benefit cap, as shown by evaluation evidence”.

In fact, though there has apparently been a positive employment effect, it is marginal: for every 100 households affected by the cap, around 5 will have moved into work because of it. The report describes DWP repeatedly “over-claiming” the employment benefit of the cap, with the UK's Statistics Authority questioning the Department's use of numbers and the Committee warning it against repeating some of its claims.

Conversely, the evidence to the inquiry shows that the cap disproportionately impacts households that DWP itself has already assessed as facing barriers to work - mainly childcare and health problems - that exempt them from the requirement even to look for it. DWP's latest stats show that in November 2018, just 18% of claimants who had their benefit capped were claiming Job Seeker's Allowance, the benefit for which claimants are expected to be actively seeking work. Put another way: 82% of capped households have no work or even job search conditions attached to their benefits. 

The Committee notes “Few of these claimants will be comforted by the Minister's  flippant suggestions (in evidence to the Committee) that they simply move house, renegotiate their rent or even take in a lodger.  In reality, they are left with no way to escape the cap …. A policy aimed at people who could work but were choosing not to is now being applied to single mothers with newborn babies and people with serious health conditions.”

Chair's comments

Rt Hon Frank Field MP, Chair of the Committee, said:

‘It would be difficult to think of a more cruel cut. Benefits are being cut with the aim of driving people into work, but four in five people bearing this cut aren't expected to work. What genius in government thought this one up?'

The claim about fairness is almost equally unconvincing. Families in work were already better off than similar families who were out-of-work, without the cap.  The Government set  the  cap  by  referring  to earned  income,  without  taking  into  account  the  additional  benefits that in-work families can receive. The Committee concludes that, to reconcile the cap with its own stated objectives, it should ONLY apply to claimants who are either:

  1. claiming JSA; or
  2. claiming UC and in the “All work-related” activity group.

The report flags a now recurring theme in evidence across the Committee's welfare inquiries: benefits are already set at levels “inadequate” for basic living costs, harshly compounded by policies including the cap, the benefit freeze the Committee is this week calling to be lifted, benefit sanctions, and the real income losses in the transition to Universal Credit. The Committee says that the Government should increase the new, restricted caps to take account of in-work benefits, as well as earnings, in the calculation.  It should also ensure that the cap is uprated in line with inflation.

Before Universal Credit only Housing Benefit could be capped, but under UC it is not only a household's housing costs payment that can be reduced but its whole award, cutting into the household's whole income—even into money meant for children. The little money these households have left can be further reduced by deductions to their UC  awards,  for example to repay  the “Advances”  people took to tide them  over the minimum five-week wait for a first UC payment.

The Government counters simply by saying that this is how it's supposed to work, but the Committee is already hearing of “extreme but real” instances of families left with so little their children are being taken into care because of neglect. It says the Government must “ring fence” certain elements of UC to protect against these “appalling effects”. It is further “wholly unacceptable” that the problems of alignment  between working claimants' payday and the UC assessment period  can  mean  people  who  are  earning  enough  to  escape  the cap are capped anyway “suffering   significant   financial   losses   simply   because   of   a fundamentally   flawed   administrative   process.”

Heidi Allen MP, Committee Member, said:

"All Government policy must be based on evidence, yet there is scarce evidence to suggest the cap is moving people into work - not least because 82% of those affected by the cap are not in any case expected to work because of health or caring responsibilities. This cap and the benefits freeze are outdated policies, not taking into account the increased cost of living since their inception. Bluntly, the Government doesn't have the objective or moral grounds on which to maintain its position."

The report highlights a second emerging theme: government cost shunting. DWP repeatedly claims that the benefit cap is saving money, but the claimed savings of £190  million a  year  are  just  1%  of  expected savings from welfare reforms since 2010, and  a  mere  0.1%  of  the  total  welfare  bill. Even  these  small savings  are  likely  to  be  an  overestimate. In recognition of the hardship caused by  the  cap,  DWP  gives  back  a  significant  portion  of the   money   it   takes   from   claimants  to local councils, for Discretionary   Housing   Payments. 

This circular process of transferring public money    from    one    budget    to    another— a    straightforward administrative  issue  for  the  Department—fails  to  consider  the  huge impact  on  families,  who  are  left  relying  on  less  stable  support. The Department does not  even include these costs in its figures, nor does it consider the increased costs to local authorities through temporary accommodation,  or  the  wider  costs  that  hardship created  by  the  cap has on other public  services and on wider civil society.

Further information

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