Welfare Reform Bill: the ‘Benefit Cap'

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Welfare Reform Bill: the 'Benefit Cap'

Introduction

This briefing is written to explain why the TUC is opposed to the 'benefits cap'. The TUC's stance on other elements of the Welfare Rights Bill was set out in our Third Reading briefing. The TUC strongly opposes the cap; we believe it is wrong in principle, we are concerned that it will affect people in work and disabled adults and we are especially concerned that its impacts will fall most heavily on children.

General points

The cap is, in our view, based on a false claim about fairness. The claim is that all of the income of people on benefits should be compared with part of the income of people in work. Child Benefit and Housing Benefit are not counted when calculating average earnings, but are counted towards the cap.

It is sometimes claimed that the benefit cap is aimed at persuading unemployed people to get jobs and that people in work and disabled people have nothing to fear from the cap. These are dangerously misleading notions. The DWP impact assessment indicates that just 39 per cent of the households affected by the cap will be in receipt of Jobseeker's Allowance. It also indicates that households receiving Housing Benefit and Child Tax Credits - benefits that can be received whilst in employment - will be affected, though those receiving Working Tax Credit will be excluded. This means that people working up to 24 hours per week will be affected by the cap.

Although people who receive Disability Living Allowance will be excluded, other disabled people will lose out: according to the impact assessment, 22 per cent of households affected will be in receipt of Employment and Support Allowance.

The benefit cap and children

We are concerned that the cap will have a particularly harsh effect on children. The DWP impact assessment indicates that

67,000 households will have their benefits reduced by the policy in 2013/14 (this is roughly one per cent of the out-of-work benefit caseload) and 75,000 in 2014/15. Within these households, and in 2013/14, the number of adults affected is 90,000 and the number of children 220,000.

In other words, 71 per cent of the 310,000 individuals affected by this policy will be children.

The DCLG accepts that 20,000 families are likely to become homeless 'as a result of the total benefit cap'. The Children's Society has calculated that, 'based on an equal distribution across families affected, this would mean around 27,600 adults and 82,400 children could be made homeless as a result of the cap'. That is, 75 per cent of the 110,000 individuals at risk of homelessness are children.

The average affected family will lose £93 a week; 35 per cent will lose more than £100 per week. The DWP impact assessment lists large families (with three or more children) as the first group likely to be hit by the cap. As the latest edition of the DWP's Households Below Average Income report indicates, large families are already more likely to be poor:

Risk of children being in poverty (60% median income) by size of family, 2009-10

Before Housing Costs

After Housing Costs

One child

16%

26%

Two children

18%

27%

Three or more children

26%

36%

All children

20%

29%

Last month, the Institute for Fiscal Studies and the Family and Parenting Institute published a study showing that, between 2010-11 and 2015-16, relative child poverty is likely to increase by around 400,000, and absolute child poverty by around 500,000. Although fewer than ten per cent of children live in families with four or more children, these families will account for 100,000 of the 500,000 increase in absolute child poverty. Larger families are more likely to rely on benefits, and so will tend to be more likely to be affected by welfare cuts generally; even so, the FPI argues that the impact on these families will be 'largely driven' by the cap.

Notes


http://www.parliament.uk/documents/impact-assessments/IA12-003.pdf p. 9.

http://www.parliament.uk/documents/impact-assessments/IA12-003.pdf p. 5.

http://www.parliament.uk/documents/impact-assessments/IA12-003.pdf

http://www.guardian.co.uk/politics/2011/jul/02/full-text-letter-eric-pickles-welfare-reform

http://www.childrenssociety.org.uk/sites/default/files/tcs/distributional_impact_of_the_benefit_cap.pdf

http://www.dwp.gov.uk/docs/eia-benefit-cap-wr2011.pdf

http://www.parliament.uk/documents/impact-assessments/IA12-003.pdf para. 15.

http://www.familyandparenting.org/NR/rdonlyres/30F86FFB-8911-4E40-BEF3-D7B071C9C6F8/0/FPI_IFS_Austerity_Jan_2012.pdf p. 3.

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