Tomorrow, we’ll probably hear more about the government’s plan to lower the maximum amount of benefits that an out of work family can claim, from £26,000 a year to £23,000.
The ‘Benefit Cap’, to give it its more familiar name, was first introduced in 2013. It limits the maximum benefit claim for out of work households to £500 a week for families and £350 for couples and individuals without children.
The benefit cap affects a wide range of benefits[1]. This includes a small amount of unemployment support (around £70-£110 a week), as well as benefits that the majority of families receive to help with the costs of having children (child benefit – £21 for the first child and more after) and child tax credit (up to £64 for low income families for the first child and more after).
Shelter has closely monitored the benefit cap for two main reasons. The first is that housing benefit (the main form of support that working and non-working households receive to help them pay their rent) is also included in the cap. The second is the way the benefit cap actually works in practice: it is from a families’ housing benefit payment that any amount over the level of the cap is removed.
In fact, despite the rhetorical focus on worklessness, housing has always been front and centre of the debate about the benefit cap. In 2012, the Chancellor explained that the move was to make sure that out of work families don’t ‘live in homes that (working families) can only dream of’.
How many people are currently affected?
Since its introduction in 2013 a total of 55,000 families have had their benefits capped at some point.
But at any one time, this number is far smaller. The most recent data shows that just over 23,000 households are currently subject to the benefit cap.
Most of these are larger families, in expensive areas. More than four out of five (81%) capped households are families with three or more children. Almost half of capped families are in London.
What would be the impact of the change?
We know that lowering the benefit cap to £23,000 will affect more families – that’s inevitable. But what we don’t know is who these new families would be, where they are living and the circumstances they are in. Is it just large families in prime London postcodes, or are other families caught by the cap?
We looked at eight different families who may be subject to the benefit cap. Four were two parent families, seeking work and claiming jobseekers allowance. Four were one parent families with children aged four and under, claiming income support (and would therefore struggle to take on part-time work).
We calculated how much each family would be eligible to claim in other benefits (for example, out-of-work benefits and child benefits) before housing support was taken into account. We were then able to see how much housing benefit they would be able to claim before hitting the cap.
Different sized families need different sized homes, and housing costs vary across England. So the amount of housing benefit that each family needs differs between families and across the country. We compared the amount each would receive with the amount they would need in different areas.
| Number and age of children | Amount of housing benefit they could claim before hitting the cap (per week) | |
| 1 | One child aged 3 | £242.82 |
| 2 | Two children aged 3 and 6 | £175.92 |
| 3 | Two children – boy and girl aged 3 and 11 | £175.92 |
| 4 | Couple – Three girls aged 3, 7 and 11 and one boy aged 12 | £42.12 |
As is immediately obvious, under the new cap the family with four children would be unable to find a home with the number of bedrooms they need, anywhere in England, without hitting the benefit cap. The size of the shortfall is also remarkable. The cheapest place to rent the four bedroom home that this family would need is Bradford – where a home at the lower end of the market would cost £123. So even here this family would face a shortfall of £81 a week.
The impact of a lower cap on smaller families is also dramatic. Under the current system (a cap of £26,000 a year), families with one child or with children who could share a room (examples 1 and 2) are unlikely to be hit by the cap unless they live in certain parts of London. Families with two children who are not able to share a room (example 3) may get capped in a handful of places in London or close by, in Surrey or Hertfordshire.
If the benefit cap is reduced to £23,000 a year, small families in more unexpected areas also get caught by the cap. Families with two children may find it hard to avoid in areas including Basingstoke, Southampton and Harlow.
The other change is that very small families may now see their benefits capped too. Couples or single parents with just one child may find it hard to avoid having their benefits capped in certain areas. And these aren’t just traditionally exclusive areas in the West of London but areas like Catford and Tottenham.
While the rhetoric may be all about large, workless families in expensive locations, the reality is that lowering the benefit cap would hit smaller families, in average size homes, in less expensive areas.