A new benefit cap

Issue 255 (December 2016)

Dan Norris describes rules setting the benefit cap at a lower level but with a few more exemptions.

Introduction

Provisions in the Welfare Reform and Work Act (2016) to reduce the maximum amount of benefits many working-age households may receive came into force on 7 November 2016.

The benefit cap had stood at £26,000 pa (£18,200 for single people without children) since its introduction in in 2013.

Former Chancellor George Osborne announced in the July 2015 budget that the cap would be reduced to £23,000 for claimants living in Greater London and £20,000 for people living outside of the capital (with the equivalent cap for single people without children set at

£15,410 and £13,400 respectively).

Greater London is defined as the 32 London boroughs and the City of London.

The reduction of the benefit cap and introduction of different rates for London and the rest of the country was brought into effect by the Welfare and Work Act (Commencement No.3) Regulations 2016 (SI No.910) and the Benefit Cap (Housing Benefit and Universal Credit) (Amendment) Regulations 2016 (SI No.909 – see Bulletin 254, p10.

Although the Commencement Order regulations set 7 November 2016 as the start date for the reduced benefit cap, local authorities have discretion not to apply the cap – and are not expected to do so – until they are sent an 'apply cap notification' by the Benefits Cap Processing Team at the Department for Work and Pensions. The process of contacting local authorities began on 7 November 2016 and will conclude by 23 January 2017.

The reduced cap also applies, in effect, to universal credit claimants from the start of the first assessmentperiod after 6 November 2016.

New exemptions

The Benefit Cap (Housing Benefitand Universal Credit) (Amendment) Regulations 2016 amend the Housing Benefit Regulations 2006 (SI No.213) and the Universal Credit Regulations 2013 (SI No.376) by adding carer's allowance and guardian's allowance to the list of benefits which exempt the recipient’s household from the benefit cap.1

Universal credit claimants are additionally exempted from the benefits cap if the carer element is included in the calculation of their award.

These amendments follow the High Court’s judgment, in Hurley & Others v Secretaryof State for Work and Pensions [2015] EWHC 3382 (Admin), that failure to exclude unpaid carers from the benefits cap constituted a breach of Article 14 of the European Convention on Human Rights.

The list of benefits used to calculate the cap remains the same as that used in the higher cap introduced in 2013, with the exception of carer's allowance and guardian's allowance, which are removed.

Households where one member has reached the age of entitlement for pension credit continue to be exempted. Any amount of housing benefit paid in respect of rent on ‘specified accommodation’, such as domesticabuse refuges and supported accommodation, is disregarded in the calculation of the benefit cap.2

Impact of the cap

The reduction of the benefit cap is forecast by the Chartered Institute of Housing (CIH) to cut the benefit income of 116,000 households, including 320,000 children, by up to £115 per week.3

Government impact assessment predicts that the reduced cap will save around £110 million per annum in the long term by cutting affected households’ benefit income by an average of £60 per week.4

The Institute for Fiscal Studies (IFS) recently reported that the reduced benefits cap will affect large numbers of smaller households who avoided the £26,000 cap and significantly increase the number of affected regions.5

  • Under the £26,000 cap a non-working couple with two children renting in the private sector were highly unlikely to be affected unless they lived in Greater London, where rents and housing benefit claims are comparatively high. Under the reduced cap, such a household may be capped in more than half of UK local authorities.
  • Forty-two per cent of the households affected by the £26,000 cap were in London. Under the new cap only 22% of capped households will be in London.
  • In the north east of England and in Wales where tenants pay some of the lowest average rents in the UK, 8,000 households will see their housing benefit(or universal credit) capped.

The CIH has reported that although the cap is higher in Greater London, 6,000 families with only one child will be affected by the reduced cap.6

The IFS report argues that the discretionary housing payment budget (DHP), recently increased to £870 million over the nextfive years,

should be offset against projected savings. Forty per cent of households affected by the 2013 cap have successfully applied for a DHP.

Confusion

The publication of new sets of benefit cap regulations fails to resolve confusion as to when a local authority which is presented with evidence that a claimant should be exempted will remove the cap immediately or delay until given notice to do so by the DWP.

Regulation 75B of the Housing Benefit Regulations 2006 gives local authorities discretion to apply the cap before receiving notice to do so from the DWP. These regulations, however, do not specify that local authorities have discretion regarding whether to dis-apply the cap.

It is therefore arguable that local authorities must remove the cap on receipt of evidence of an exemption and may be acting unlawfully if they refuse to do so until given notice by the DWP.

Despite the apparent absence of a discretion not to remove the benefit cap, HB circular A10/2016 (2nd revision)7advises local authorities who receive evidence that a claimant is exempt not to remove the cap until given notice to do so by the DWP. On this advice, arrears of housing benefit may be payable as the cap would ultimately be lifted and entitlement to housing benefit increased, from the date of the award of exempting benefits.

Claimants may argue that a local authority which contends it does have discretion to not dis-apply the cap is acting still unlawfully if it exercises that discretion and decides not to remove the cap immediately on receipt of evidence of an exemption.

Comment

CPAG is concerned that the benefit cap breaks the link between needs and entitlement, pushing many vulnerable households’ incomes below subsistence levels. There is evidence that limited claimants – 5 per cent – responded to the imposition of the higher cap by moving into work.8 However, it is acknowledged in benefit regulations for many claimants, such as lone parents with young children, that work is not a realisticoption. As the cap affects more regions, the option of moving to cheaper accommodation is limited and affected families face no choice but to reduce still further their expenditure on essentials such as food and clothing.

 


 

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  • 1. 'Household' includes the claimant, his or her partner and any children or qualifying young person they live with.
  • 2. Reg 75C HB Regulations
  • 3. Chartered Institute of Housing, The Likely Impact of the Lower Overall Benefits Cap, Briefing paper, November 2016, available at www.cih.org/freepublications
  • 4. Department for Work and Pensions, Welfare Reform and Work Act: impact assessment for the benefit cap, August 2016, available at www.gov.uk/government/publications/welfare-reform-and-work-act-impact-as...
  • 5. A Hood and R Joyce, A Tighter Benefit Cap, Institute for Fiscal Studies, November 2016, available at www.ifs.org.uk/publications/8717
  • 6. See note 3, Summary of results
  • 7. See paras 41-48 HB Circular A10/2016 (2nd revision) 8 See note 5