Covid-capped | CPAG

Covid-capped

Published on: 
06 August 2020

Number of households hit by benefit cap doubles since Covid-19 - many families hit by wage drops and loss of benefits

Official figures out today show the number of households subject to the benefit cap has jumped by 75,000 since the outbreak of Covid-19 – that’s almost doubled the number affected since the last figures were reported in February*. Fifty-nine thousand of these households are families. The cap limits the total amount of benefits low-earning or non-working households can have.

The DWP’s commentary on today’s figures says:

The number of households that had their benefits capped increased by 93% in May 2020 from February 2020 to 154,000 households. This is the biggest increase in the number of capped households since April 2013 and has been driven by an unprecedented increase of 665% in the number of newly UC capped households, a reflection of the impact of the COVID-19 pandemic.

Many of these newly capped families are likely to have been capped because they’ve lost earnings or their income has otherwise changed as a result of the virus, yet social distancing requirements mean it is extremely difficult or impossible for them to escape the cap by finding more work (and childcare) or moving to cheaper housing. For some the cap will mean a big fall in their social security support on top of their earnings shortfall- with today’s DWP figures showing an average loss for all currently capped households of £58 per week.

Child Poverty Action Group’s Early Warning System** is receiving a growing number of cases of parents who have been newly capped because either:

  • their working hours have been cut because of Covid-19 so they cannot earn enough to reach the £604.59 monthly earnings threshold at which universal credit claimants are exempt from the cap
  • they are furloughed on a percentage of their usual pay and so their earnings have fallen below the earnings exemption threshold in universal credit
  • they are newly capped because the Covid-19-related increases in Universal Credit and in Local Housing Allowance rates mean their benefit income now reaches or exceeds the £20,000 or £23,000 per year cap limit. These people will not benefit from the full value of upratings – (their shortfall being dependent on how close they were to the cap limit before the uprates took effect).

Child Poverty Action Group is also receiving cases of families who because they already had the cap applied before Covid-19, have gained nothing from the Government’s decision to uprate Universal Credit and Local Housing Allowance rates as part of its Covid-19 emergency support package. Yet these households have faced the same extra financial pressures as other claimants because of the pandemic.

Today’s DWP figures show that in May this year 59,000 more families were capped than in February. The figures show that of all households currently capped:

  • 87% (133,000) are families. 62% are single parent families.
  • The estimated average weekly amount of benefit lost through capping was £62 for households which contain children (£73 for couple-families,£57 for single parent families)

The benefit cap limits how much social security support is paid to people out of work or with very low earnings. It restricts total benefit awards (including for housing costs) to £20,000 a year for families outside of London and £23,000 a year for those in London, regardless of the family’s needs. For universal credit claimants the cap is applied when claimants earn less than £604.59 a month (April 2020 to March 2021 figure – equivalent to working 16 hours a week at the 'national living wage' for over-25s).

For ‘legacy benefit’ claimants, who receive housing benefit the cap is applied to single parents if they work less than 16 hours per week, to couple-parents if they work less than 24 hours between them, and to single people with no children if they work less than 30 hours.

Because of their higher costs, families with children are more likely to be affected by the cap, with single parents disproportionately affected. Families in high-rent areas are especially at risk of being capped.

Today’s figures show 40% of families affected by the cap have a child under 5 and 22% of capped families have a child aged under 2.

Child Poverty Action Group’s Chief Executive Alison Garnham today called for the cap to be scrapped:

“The benefit cap has always been nonsensical because it’s an arbitrary limit that’s applied irrespective of needs. In a pandemic it is egregious. People who’ve lost earnings or jobs because of Covid-19 are finding that they’ve also lost significant amounts of their social security support because of the cap. That isn’t right. The cap is causing intense hardship yet in the pandemic most routes for escaping it are closed off so families are left without a life raft.

“The cap hits hardest the very families who are least able to avoid it – single parents with very young kids who even in normal times can’t just get a new job, increase their working hours or up sticks to cheaper housing – precisely because they are caring for very young children. In a pandemic their chances of escaping the cap are extremely limited or non-existent.

"Parents on low wages have no wriggle room – if they receive universal credit and earn less than £604 a month they’re capped but if they earn more than £616 they lose free school meals. It’s a terrible poverty trap. The cap should be lifted so that every parent can meet their children‘s needs in the pandemic and beyond it.

“We should not be further impoverishing vulnerable children because their parents live in high rent areas and for very real and practical reasons are unable to work more hours or move house to escape the cap.”

Notes to Editors:

Today’s DWP statistics are here:

https://www.gov.uk/government/statistics/benefit-cap-number-of-household...

and here

https://stat-xplore.dwp.gov.uk/webapi/jsf/login.xhtml

*In February 2020 79,000 households were capped https://www.gov.uk/government/statistics/benefit-cap-number-of-household...

Households on universal credit no longer earning the minimum amount continue to be exempt from the cap for a nine-month grace period if their earnings were above the threshold in each of the preceding 12 months.

**Child Poverty Action Group’s Early Warning System collates and analyses casework from welfare rights advisers across the UK.

CPAG’s latest briefing on Covid-19 and the benefit cap is available from the press office.

CPAG media contact: Jane Ahrends 07816 909302