The benefit cap - which limits the total amount of benefit and tax credit income that an out-of-work household can receive, subject to certain exemptions – was reduced from £26,000 a year to £20,000 a year outside London and £23,000 within London. The lower cap was rolled out nationally over a twelve week period starting on 7 November last year. Implementation was completed by mid-January.
Rt Hon Frank Field, Chair of the Committee, said:
"Once again we see a benefit change purported to push people into work, while the evidence points to the contrary effect. Changes that actually did save money and help the strivers get into proper, gainful employment would be very welcome, but that is not what we are seeing with new policies like Universal Credit or the lower benefit cap."
Karen Buck MP said:
"As the benefit cap starts to bite across Britain it looks from the evidence we’ve seen so far like a drastic cut to income for people who are really unable to cut their living costs any further. The evidence does not show us that being plunged further into poverty encourages or helps people to find work, and the vast majority of those hit by this cut are already recognised as unable to work at the moment. It is very hard to see any benefit from the benefit cap."
The inquiry is being discontinued as a consequence of the dissolution of Parliament, but the evidence submitted to the Committee provides an initial indication of the difficulties faced by claimants, housing providers and local authorities in the first few months of the lower cap’s implementation.
Preliminary effects of the lower cap
Benefit Cap caseload statistics for February 2017 are scheduled to be published on 4 May 2017. These will be the first set of official statistics showing the impact of the lower cap.
The Government estimates that, in the absence of any 'behavioural changes' from claimants, 88,000 households will be affected by the new cap, compared with around 20,000 under the previous policy.
The new cap is not only deepening the impact on households but also spreading it more widely across the country – the proportion of capped households who are outside London is set to increase from three-fifths to four-fifths.
In advance of the first set of official statistics on the lower cap, local authorities have reported to us that the lower cap is beginning to bite in areas where there had previously been relatively few affected households. For instance, Newcastle City Council (BNC0034) have seen their caseload of affected claimants rise from 72 in March 2016 to 358 in March 2017. Highland Council (BNC0015) told us that by March 2017 the lower cap was affecting 75 households, as against around a dozen previously.
Advisory services are reporting a substantial rise in demand from households affected by the cap – with claimants suffering drastic and abrupt reductions in income and severely constrained in their ability to avoid the impact:
- Citizens Advice Scotland (BNC0036) told us of a large rise in requests for benefit-cap related advice since the third quarter of 2016, typically from lone parents and large families.
- Among the examples provided by Shelter (BNC0039) was that of a mother-of-three in Sunderland who had successfully made arrangements with her private landlord to settle the rent arrears caused by the original cap, but who now potentially faces the threat of eviction again due to a further £180-a-month benefit cut.
- UK poverty charity Turn2Us (BNC0024) told us of worrying trends reported by their helpline over the last year: “The most worrying trend that is emerging is pregnant women asking the call handler to undertake a benefit check to ascertain what they would be entitled to if they continue with the pregnancy, citing that the outcome will help them to decide whether they continue with the pregnancy or terminate it.”
- Halton Housing Trust (BNC0042) told us that tenants’ initial response had been to apply for additional benefit such as Discretionary Housing Payments or to claim disability benefit that confer exemption from the cap. They told us that “Where there are concerns about the lower benefit cap, it does not initially act as an incentive to find work.”
There are major concerns about the ability of affected households to reduce their housing costs in response to the cap – particularly as many households affected by the lower cap already live in social housing which is typically the cheapest accommodation available.
- Shelter (BNC0039) told us that “nearly 60% of households affected by the lower cap already live in social properties”, and for those who are in private rented accommodation the option of social housing is “increasingly scarce and difficult to access”
- London Councils (BNC0033) told us that the lower cap means that “it will be increasingly unviable for households to avoid the cap by moving to lower value areas (including areas outside of London) given that housing costs will be more widely unaffordable. [….] the lower rate is likely to bring a new cohort of vulnerable customers into the scope of the cap that may not be work ready but who will be unable to escape it by moving to lower value areas.”
Concerns have also been raised about the effect of the cap on families placed in expensive temporary accommodation by local authorities in fulfilment of their statutory duty to prevent homelessness. Research by Policy in Practice (BNC0041), a welfare policy consultancy which works in partnership with local authorities, has found that the benefit cap more than doubles the average gap between housing benefit and rent for families in temporary accommodation, from £1,704 per year to £5,520 per year – leaving local authorities to plug the gap. Croydon alone could face extra costs of £1.1m as a result.
Local authorities can make Discretionary Housing Payments, funded in large part by allocations from by central government, to help families struggling with their housing costs. However numerous organisations have expressed concerns about the pressure that the lower cap is placing on DHP budgets, particularly in conjunction with the effect of other welfare reforms.
Newcastle City Council (BNC0034) and London Councils (BNC0033) told us that the extra DHP funding provided to help mitigate the benefit cap is not proportionate to the rise in demand. Zacchaeus 2000 Trust (BNC0021) told us that “The level of DHP funding being made available is clearly insufficient to support those worst affected by the new cap”, while Shelter (BNC0039) told us that DHPs can be difficult and slow to access and can come with extra conditions attached, such as a requirement to show engagement with work programmes.
The cap was initially imposed by means of a reduction in claimants’ Housing Benefit award. However, with the rollout of Universal Credit full service across the country, an increasing proportion of capped households will be recipients of Universal Credit instead. The Chartered Institute of Housing (BNC0044) told us that such families stand to be even worse off than capped families on Housing Benefit "as the amount by which their benefit can be reduced will not be limited to the just the housing costs element."
A number of respondents raised concern about the inadequate provision of information regarding the circumstances of capped Universal Credit claimants. Policy in Practice (BNC0041) told us that reliable information on claimants’ circumstances is “an essential condition” to successful multi-agency provision of local support to affected claimants, but that “this condition is not met in Universal Credit Full Service areas. This is due to a very limited ability to identify capped claimants on UC by frontline advisors, and a lack of a systematic sharing of information on Universal Credit claimants between the local Job Centre Plus office and local authorities. As a result of this, households on UC affected by the benefit are more likely to fall through the net of support available to them, paying the highest price as this policy is implemented.”
Halton Housing Trust (BNC0042) told us that have not been proactively informed about how many of their UC-claimant tenants are subject to the cap, due to lack of information sharing – “This will only become apparent if they request support or accrue rent arrears.” Similarly, Symphony Housing Group (BNC0022) told us that “The inability on the part of the DWP to share information about Universal Credit claimants who are affected by the cap is counterproductive.”
Claimants face significant barriers to entering work
One of the main purposes of the benefit cap is to encourage claimants to look for work. Many respondents to our call for evidence have however raised serious concerns about the appropriateness and effectiveness of the benefit cap as a means of achieving this, given that the vast majority of affected claimants have already been assessed as not being required to seek work as a condition of receiving benefit due to ill-health/disability or caring responsibilities for very young children. Under the original benefit cap only 13 per cent of those affected were JSA claimants who were formally subject to a requirement to seek work.
- CPAG (BNC0073): “There are gaping inconsistencies between conditionality as applied in the rest of the benefit system – which is demanding, but permits adjustment to personal circumstances - and the blunt conditionality that is in effect created by the benefit cap. Not only is the conditionality effectively created by the benefit cap extremely blunt, but the sanction is often far harsher than that in any other benefit system.”
- Salford City Council (BNC0072) told us: “The benefit cap is effectively a “sanction” which results in the very sudden loss of income and typically, means a choice between paying rent or food and utilities. Many of the families our commissioned services are working with have very young children and under social security legislation are not expected to move into employment.”
- Policy in Practice (BNC0041) told us that “a widespread shortage of childcare supply” and “poor health conditions – often associated with hidden mental health issues” are the two most significant barriers to moving into employment.
- Halton Housing Trust (BNC0042) told us that the benefit cap can be counterproductive: “Customers dealing with challenges of living on a reduced income, diverts their focus to managing this, rather than being work ready or incentivised to look for work. In these circumstances the additional pressures associated with a reduction in income can act as a barrier rather than an incentive.”