Benefit cap: Homelessness threat or success story?

Today the Government lays regulations to bring the overall benefit cap into force from April 2013. This measure – which restricts the total amount of benefits an out-of-work family can receive to £26,000 a year –  proved to be one of the biggest flashpoints of recent welfare reform.

The Government lost a crunch vote that amended the cap to remove child benefit, although Ministers overturned it by citing financial privilege. The Department for Work and Pensions (DWP) was forced to make some rare concessions and provided a £120 million emergency pot to help people at risk of losing their homes. Whatever the public reaction to the cap may have been (and it is popular with many voters) it was clear that many MPs and Lords had concerns about unintended consequences.

Shelter shared their concerns. £500 per week sounds a lot, but the problem is it doesn’t go very far if you have to rent privately in the south-east. The cap is a crude measure that takes no account of the unavoidable differences in housing costs caused by location and tenure. The cap will put households at increased risk of homelessness. It will also create considerable barriers for local authorities trying to house those who have already lost their homes and increase the risk of homeless families being shipped across the country.

However, the DWP has offered little mitigation against such concerns. Today Iain Duncan Smith accused some of those who had criticised the cap of ‘needless scaremongering’ and insisted the cap was ‘already a success’.

Not one single household has yet lost any income because of the overall benefit cap. For the Secretary of State to pre-emptively dismiss legitimate concerns about its impact on poverty and homelessness is unhelpful at a time when the focus should be on signposting affected households to advice and support.

In claiming the cap is already a success, Duncan Smith has made much of the fact that 1,700 of the 56,000 households set to be affected have moved into work. If they remain in employment they will avoid any penalties when the cap comes into effect.

Ministers always said that the cap was supposed to change behaviour and nudge people into work – so far it has succeed among three per cent of households.

The big question is, of course, whether these 1,700 households would have found work anyway, or if the cap has genuinely succeeded in changing behaviour. If they are unemployed it is likely they would have moved into employment by April 2013. Three-quarters of JSA claimants typically find a new job within six months and just over one in ten JSA claimants are still unemployed after a year.

Contrary to popular belief, a life on benefits is not a lifestyle choice sought by many and many low income households can expect to cycle in and out of work because of job insecurity. Based on this one would not expect every household identified as at risk of the cap in April 2012 to actually be affected by April 2013.

Clearly, Shelter hopes no one will be made homeless, made to uproot their family or forced deeper into poverty as a result of the cap. But unfortunately the risk is undeniable when one in five affected households are set to lose over £150 per week in housing benefit. Families in such circumstances will have little choice but to move. Research by Shelter and the Chartered Institute of Housing revealed that for a private renting family with three children the cap will apply across a vast geographical area, raising the prospect of a move far away from local job connections, family and other informal support.

It’s good that the DWP is proactively contacting households set to be affected and offering tailored support to return to work. But it cannot be assumed that every affected household will be able to take up a job in April. The cap will bring real challenges, and it is organisations like Shelter that will pick up the pieces if the worst happens.