Government benefit cap 'based on myths'

Published by Jon Land for 24dash.com in Housing

The Government's proposed benefits cap is based on a set of myths, a leading charity has claimed.

The Child Poverty Action Group (CPAG) published its myth-busting analysis of the Coalition's flagship welfare policy the day after MPs voted to overturn amendments made by Peers and reinstate the original policy proposals.

Here are the 'myths' in full and what the CPAG has to say about them:

Myth 1: The cap is just for out of work claimants of benefits

Ministers have fostered the impression that this is about ensuring working families get a fair deal compared to those who don’t work. However, Ministers confirmed in their impact assessment document that any couple working up to 23 hours a week will still be affected by the cap when it is introduced. That means that many families not in receipt of any out-of-work benefits (e.g. jobseekers’ allowance (JSA), income support (IS) and employment support allowance (ESA)) and receiving just earnings, tax credits and in work benefits (e.g. housing benefit (HB) and council tax benefit (CTB)) will be hit by the cap too.

Myth 2: Claimants have more money than working families

Most of those hit by the cap will be in private rented households. It is the landlords that get the cash – often paid directly to them – meaning the families are really left struggling to pay for basic costs like utility bills, food, clothes, transport etc. The root problem of rising housing benefit costs is the failure to maintain sufficient supplies of social housing, and the runaway inflation of private rents due to the bubble in the housing market. The cap does nothing about the root problem and the crisis in the supply of affordable housing is predicted to worsen by housing experts.

Myth 3: Families with a disabled member will not be affected

Disability living allowance (DLA) (then the personal independence payment (PIP)) will be used as a proxy to identify households that will be excluded from the cap on grounds of disability. However, many disabled people do not qualify for DLA – and even fewer will qualify for PIP. The Government has admitted that they expect half of the households hit by the cap to have a disabled person (using the Disability Discrimination Act 2010 definition). Poor decision making for DLA claims with high rates of successful appeals will also mean many families going in and out of the cap unfairly, causing chaos, debt and homelessness.

Myth 4: There will be no behavioural changes and social impacts

The Government’s impact assessment has assumed that there will be no behavioural changes, and states that there will be no social impacts. However, the measure introduces a couple penalty that will mean some families may be able to receive twice as much in benefit payments if they separate. A couple with at least two children who are subject to the £500 cap could claim up to £1,000 in benefits if the parents separate and divide the residency of their children between two homes. The incentive for families to break up will not just be financial, as it may also mean that they are able to remain living in the same area so that they can avoid their children changing schools and continue living in the same neighbourhood as networks of friends and relations.

Myth 5: The cap will deliver fiscal savings

The cap is likely to reduce benefits spending by £240 million per annum, but it will lead to costs elsewhere in the system that may surpass those savings. Warnings from within government suggest there will be a net fiscal cost. The Private Secretary to Eric Pickles, the Secretary of State for Communities and Local Government, wrote to the Private Secretary to the Prime Minster last year and said: “we think it is likely that the policy as it stands will generate a net cost” as a consequence of the homelessness and migration that will be caused, and the costs this will place on local authority services.

Myth 6: This is a new policy

This policy has in fact been tried and failed once before. The ‘wage stop’ in force during the 1970s was a similar policy which aimed to cap benefits at the level of average wages. It proved unfair and unworkable and was eventually abolished.