The problem with the ‘grace period’ | CPAG

The problem with the ‘grace period’

Published on: 
21 September 2021
Written by: 

Hannah Aldridge

Senior policy and research officer

The number of families affected by the government’s benefit cap stood at 187,000 in May 2021. These families are living on less than what they need because they are not in work or not considered to be working enough. On average, they are losing out on £238 per month.

The number of capped households is slightly lower than in February. Then the number had shot up as people who lost their job at the beginning of the pandemic reached the end of the nine-month ‘grace period’ before the benefit cap is applied. But, in practice, the grace period does not apply to everyone. Between February and May, 32,000 families were capped for the first time and 11,000 were returned to the cap after a period of work. Not all of these families would have benefited from the grace period; some would have been capped immediately after losing a job.

To be covered by the grace period a household has to have earned at least £617 in each of the previous 12 months (£617 is equivalent to working 16 hours a week at the minimum wage, and the threshold below which the cap applies). In normal times, this does not reflect the reality of many people’s working lives. People work variable hours on zero-hour contracts, or need to take periodic breaks in employment to care for children. But it’s even less realistic to expect people to have 12 months of consistent employment when strict rules limiting economic activity have been in place for most of the last 18 months.

The grace period will only help some of those who have been furloughed throughout the pandemic and then lose their jobs when the scheme comes to an end. It won’t apply to people who lose work in the months ahead if they had stopped working when schools were closed and returned to work when they reopened. It won’t help those with variable working hours who don’t have the required 12-month block of steady earnings. They’ll be capped every month that their earnings drop below £617, even while they are still working.

We have seen this throughout the pandemic: people with a recent work history being subject to the cap because they do not qualify for the grace period. For example, this family:

A father had been working for three years prior to being furloughed and then subsequently made redundant in August 2020. The family survived on tax credits and child benefit but in November 2020 had to claim UC. But, because the father’s employment did not end immediately before he claimed UC, he did not qualify for the grace period and £630 was instantly deducted from their UC award.

Given that we have been told to prepare for renewed COVID restrictions in the months ahead, we can expect to see more people being capped and re-capped as they try to get a foothold in a precarious labour market.

The problems with the grace period highlight the problems with the benefit cap overall. The government claims that the benefit cap provides people with an incentive to work, but the reality is that it mostly affects those unable to earn enough to escape it – for example because of caring responsibilities. There is only one solution to this problem, and it’s a simple one – abolish the benefit cap and lift 60,000 children out of poverty.