Benefit cap and Welfare cap

The benefit cap is a British Coalition government policy that caps the amount in state benefits that an individual household can claim per year.^[1] The benefit cap was introduced at £26,000 per year (£500 per week) which is the average income of a family in the UK.^[2] For single people with no children it was set at £18,200 per year (£350 per week). From Autumn 2016 it will be reduced to £20,000, except in London where it will be reduced to £23,000.

The benefit cap was announced in the October 2010 Spending Review by the Coalition Government and was contained in the Welfare Reform Act 2012 and the Benefit Cap (Housing Benefit) Regulations 2012. It started being introduced in April 2013 and was fully implemented by September 2013.

The benefit cap should not be confused with the welfare cap, which is a self-imposed limit on the amount that the Government can spend on certain benefits. The welfare cap was one facet of the Coalition government's wide-reaching welfare reform agenda which includes the introduction of Universal Credit and reforms of housing benefit and disability benefits.

Policy

Cap on household welfare

Affected benefits:

• Bereavement Allowance
• Carer’s Allowance
• Child Benefit
• Child Tax Credit
• Employment and Support Allowance
• Guardian's allowance
• Incapacity Benefit
• Income Support
• Maternity Allowance
• Severe Disablement Allowance
• Widowed Parent's Allowance

Cap on Total Welfare Spending

According to the 2014 Budget the 'cap' will be set at £119.5bn in 2015/16 and will increase to £126.7bn by 2018/19.^[3] However, housing benefit and Job Seekers Allowance is not included in the overall cap on welfare spending. In June 2014 leaked internal documents suggested that the Coalition government could breach its own welfare spending cap.^[4] This was confirmed in the 2015 Spending Review.

Amounts

The following are the total benefits that individual households are limited to.^[5][6]

From April 2013

From November 2016

There is concern the new cap will seriously increase poverty and homelessness among affected families and will affect over 300,000 children. The Chartered Institute of Housing did research indicating numbers affected are higher than the government expected and warns, continuing the policy will make Theresa May’s promise of a “society fairer for families”, harder to achieve. Terrie Alafat of the CIH fears many families could face poverty following a redundancy or ill health, she said, “This could have a severe impact on these families, make housing in large sections of the country unaffordable and risk worsening what is already a growing homelessness problem.” Imran Hussain, of the Child Poverty Action Group, said: “A lower benefit cap is crueller and more damaging for children.^[7] The new cap has come into force and there are fears children's life chances will be affected.^[8]

Positions of political parties

The welfare cap was supported by nearly all Members of Parliament passing by 520-22.^[9]

Conservatives

The Conservatives support the welfare cap which was announced by George Osborne at the 2010 Conservative Party conference.^[10]

Liberal Democrats

The Liberal Democrats supported the benefit cap but a notable rebel was Sarah Teather MP who described the policy as "immoral and divisive".^[11]

Labour

Labour supported the welfare cap but 13 Labour MPs rebelled including the now Labour leader Jeremy Corbyn and the now shadow Chancellor John McDonnell^[12] as well as Tom Watson and Dianne Abbott.^[13] Previously the Labour Party had expressed support for a regional cap on benefits rather than a national one without expressing a view on where the cap should be set and without stating whether the cap should be higher in London where rents are highest.^[14]

Public opinion

Opinion polling shows strong support for the benefit cap. A poll carried out in July 2013 showed that 73% support the policy and only 12% oppose the policy.^[2]

Exemptions

Those who work enough hours to claim working tax credits are not subject to the benefit cap.^[1]

In 2016 it was announced that those in receipt of Carer's allowance would be exempt from the benefit cap.^[15]

Impact

The welfare cap will impact 33,000 families.^[16] The Coalition Government predict that the policy will save £225m.^[1] Half of those affected by the benefit cap live in London where rents are 61% higher than the national average.^[17] Unemployed families in wealthier areas will be unable to afford to stay in their homes and could face homelessness.^[18]

Legal challenges

The welfare cap has been the subject of a number of legal challenges.

2013

In November 2013 the High Court rejected a judicial review of the benefit cap brought by public interest lawyers acting on behalf of a victim of domestic violence. Women's right's and domestic abuse charities have argued that the benefit cap may force domestic abuse victims to return to the home of their abusers.^[19]

2015

In Hurley v Secretary of State for Work and Pensions the benefit cap was successfully challenged on the grounds that it discriminated against carers.^[20]

Reaction

Critical

George Eaton argued in the New Statesman magazine that "the cap is less a serious act of policy than a political weapon designed to trap Labour on the wrong side of the argument".^[21]

The Guardian have argued that because the cap applies regardless of family size larger families will be disproportionately affected.^[19] Before the introduction of the cap, The Children's Society estimated 140,000 children (1.04% of children in the UK) and 60,000 adults would be affected.^[22]

Chris Goulden of the Joseph Rowntree Foundation has criticised the way in which the cap is more likely to include benefits claimed by the poorest in society:

"there is more spending that is not in the welfare cap (albeit virtually all state pension) than is within the cap. Overall, 30% of spending from within the welfare cap is on the richest half of society but 40% of the protected spend"^[23]

Faiza Shaheen of the New Economics Foundation think-tank has argued that the welfare cap will not tackle the underlying causes of welfare dependency.^[24]

Positive

Some right-wing critics have argued that the cap is too high. The Daily Mail newspaper note that an individual would require a take home income of £35,000 to enjoy an income of £26,000. Conserative MP David Ruffley has argued for a welfare cap of £20,000.^[16]

References

External links

• UK Government's benefit cap page