Benefit cap myths exposed

Published on: 
23 January 2012

On the day that members of the House of Lords vote on key amendments on the proposals for a household benefits cap, Child Poverty Action Group are exposing the myths on which the policy is based.

The Chief Executive of Child Poverty Action Group, Alison Garnham, said:

"The household benefit cap policy is built on a foundation of myths, but the 210,000 children affected will face harsh realities of severe poverty and homelessness.

“The Bishops in the House of Lords will be putting forward some sensible proposals today that will protect children and families. We hope a government that promised to be the most family friendly ever will prove it today by following their lead."

Notes to editors

The benefit cap was announced by the Chancellor, George Osborne, at the Conservative Party Conference in October 2010. The government has explicitly defended the measure on grounds of its perceived popularity and has failed to explain how they will protect the well-being of the 210,000 children in the households that will be hit by the cap, which are set to lose an average of £93 per week.

The cap policy is based on a set of myths

Myth 1: The cap is just for out of work claimants of benefits.

Ministers have fostered the impression that this is about ensuring working families get a fair deal compared to those who don’t work. However, Ministers confirmed in their impact assessment document that any couple working up to 23 hours a week will still be affected by the cap when it is introduced. That means that many families not in receipt of any out-of-work benefits (e.g. jobseekers’ allowance (JSA), income support (IS) and employment support allowance (ESA)) and receiving just earnings, tax credits and in work benefits (e.g. housing benefit (HB) and council tax benefit (CTB)) will be hit by the cap too. (For the government’s confirmation that Working Tax Credit – with it’s 24 hours of work requirement - will be used as indicative of being in work for the cap policy, see the impact assessment.

Myth 2: Claimants have more money than working families.

Most of those hit by the cap will be in private rented households. It is the landlords that get the cash – often paid directly to them – meaning the families are really left struggling to pay for basic costs like utility bills, food, clothes, transport etc. The root problem of rising housing benefit costs is the failure to maintain sufficient supplies of social housing, and the runaway inflation of private rents due to the bubble in the housing market. The cap does nothing about the root problem and the crisis in the supply of affordable housing is predicted to worsen by housing experts. (For more info on affordable housing crisis, see Shelter’s web page)

Myth 3: Families with a disabled member will not be affected.

Disability living allowance (DLA) (then the personal independence payment (PIP)) will be used as a proxy to identify households that will be excluded from the cap on grounds of disability. However, many disabled people do not qualify for DLA – and even fewer will qualify for PIP. The government has admitted that they expect half of the households hit by the cap to have a disabled person (using the Disability Discrimination Act 2010 definition). Poor decision making for DLA claims with high rates of successful appeals will also mean many families going in and out of the cap unfairly, causing chaos, debt and homelessness. (For the government’s statement, see answer to PQ 68034).

Myth 4: There will be no behavioural changes and social impacts

The government’s impact assessment has assumed that there will be no behavioural changes, and states that there will be no social impacts. However, the measure introduces a couple penalty that will mean some families may be able to receive twice as much in benefit payments if they separate. A couple with at least two children who are subject to the £500 cap could claim up to £1,000 in benefits if the parents separate and divide the residency of their children between two homes. The incentive for families to break up will not just be financial, as it may also mean that they are able to remain living in the same area so that they can avoid their children changing schools and continue living in the same neighbourhood as networks of friends and relations. (For more information, see the impact assessment).

Myth 5: The cap will deliver fiscal savings

The cap is likely to reduce benefits spending by £240 million per annum, but it will lead to costs elsewhere in the system that may surpass those savings. Warnings from within government suggest there will be a net fiscal cost. The Private Secretary to Eric Pickles, the Secretary of State for Communities and Local Government, wrote to the Private Secretary to the Prime Minster last year and said, “we think it is likely that the policy as it stands will generate a net cost” as a consequence of the homelessness and migration that will be caused, and the costs this will place on local authority services. You can read the full warning letter here.

Myth 6: This is a new policy

This policy has in fact been tried and failed once before. The ‘wage stop’ in force during the 1970s was a similar policy which aimed to cap benefits at the level of average wages. It proved unfair and unworkable and was eventually abolished. (For more information on the wage stop, see this speech by Robin Cook who successfully campaigned for its abolition)

  • CPAG is the leading charity campaigning for the abolition of child poverty in the UK and for a better deal for low-income families and children.
  • CPAG is the host organisation for the Campaign to End Child Poverty, which has over 150 member organisations and is campaigning for public and political commitment to ensure the goal of ending child poverty by 2020 is met.

For further information please contact:

Tim Nichols

CPAG Press Officer

Tel. 020 7812 5216 or 07816 909302

[email protected]