In February 2017 the Work and Pensions Committee launched an inquiry into the benefit cap, which could not continue due to the General Election. The Committee is now re-launching the inquiry. In written evidence to that inquiry before it stalled, the DWP said the benefit cap pursues three aims:
- Secure the economic well-being of the country by reducing spending on benefits and encouraging positive behavioural changes;
- Impose a reasonable limit on the total amount which a household can receive in welfare benefits to promote a fair and healthy society and maintain public confidence in the welfare system; and
- Incentivise work to reduce poverty and increase economic prosperity.
The cap is intended to incentivise behavioural change amongst claimants and secure savings for the Exchequer. The re-opened inquiry seeks to establish to what extent is it achieving that. To what extent has claimant behaviour responded to the cap, through moving into work, moving house, etc? What effect does the lower cap have on incentives, what are the barriers to behavioural change and how can they be overcome? Does the cap address high underlying rates of housing benefit and child maintenance in a fair way? Are there unintended consequences (either positive or negative) of the cap?
The benefit cap limits the total amount of benefits and tax credits payable to a working-age household. It was first announced in the 2010 Spending Review and was rolled out in 2013. The cap originally limited payments to £500 per week (£26,000 p.a.) for a family and £350 per week (£18,200 a year) for a single person with no children.
In the Summer Budget 2015, the Government reduced the cap to £442.31 per week or £23k for a household in Greater London, £15,410 for a single person, and £384.62 per week or £ 20k for a household living outside Greater London, £13,400 a year for a single person.
The rollout of the lower cap in winter of 2016–17 caused the total number of affected households to over treble from 20,000 in November 2016 to over 70,000 five months later in March 2017. As of February 2018, 64,800 households are affected. The lower cap has also increased the geographical spread of affected claimants.
Affected households are typically those with larger numbers of children, and higher housing costs. Exemptions apply for in-work households, those with certain disability or incapacity benefit entitlements (PIP, DLA, ESA support group) or recipients of Carer’s Allowance, Guardian’s Allowance and UC carer’s element.
Rt Hon Frank Field MP, Chair of the Committee said:
"People can escape the benefit cap if they move into work. But for the cap to achieve its aim of encouraging people into work, it must be paired with the right resources to ensure this is a realistic option within reach of all those affected. Where it is not, we need to understand why, and ask whether the benefit cap should operate."