DWP confirms benefit cap ‘inconsistencies’ ahead of Universal Credit

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government, Universal Credit

The Department for Work and Pensions (DWP) has confirmed that a “small number of people” will be able to claim above the £500 a week household benefit cap when it comes in next April. 

The cap – which will be £500 p/w for couples and lone parents and £350 p/w for single adults – will apply to the combined income from the main out-of-work benefits, plus housing benefit, child benefit and child tax credit.   

The Government’s cap on benefit payments is to ensure no workless family can receive more in welfare than the average working household – estimated to be around £26,000 a year.

From next year 56,000 households are expected to be affected by the cap with the average benefit reduction around £93 a week per household.

However, until Universal Credit comes in six months later, any deductions will be made by local authorities reducing housing benefit – prompting queries about those whose potential deduction is greater than the housing benefit received.

For example, larger families could be in receipt of up to £750 p/w in benefits suggesting that they should lose £250 a week from next April.

However, they may only be in receipt of £120 p/w in housing benefit. Even if all the housing benefit was reduced those families would still be claiming in excess of the cap.

The DWP confirmed that it has always known that a very small number of people would be able to claim more than the benefit cap while deductions are made from housing benefit.

A spokesperson said: “Universal Credit will solve this inconsistency and ensure no-one can claim more in benefits than the average household earns.”

The first applications to Universal Credit will be made in October 2013, with all working age claimants expected to have moved on to Universal Credit by October 2017.

Hilary Burkitt, head of strategic research at Affinity Sutton, welcomed the confirmation but said it underlines how hard the cap will hit families.

She said: "This is a tiny silver lining on the dark cloud of the benefit cap – a small number of large families will temporarily escape the full force of the benefit cap for what could be up to four years.  However it underlines how hard the cap will ultimately hit these families – not only will they lose their entire housing benefit in April next year, but when they are moved on to Universal Credit they could lose a further £100 or more per week.

"In the grand scheme of welfare reform this is a comparatively small issue, though for those hit the implications are enormous. At Affinity Sutton we expect fewer than 1% of our tenants will be affected at all by the benefit cap, and most of these will lose less than 10% of their welfare income.  Across our 57,000 homes we estimate around 100 families could face a deduction greater than their housing benefit entitlement. 

"This issue emphasises the challenges that DWP face converting pronouncements of ministers into practice – we were promised “no-one would be worse off” under Universal Credit but for these families the move onto UC will be a massive financial blow.  It shows how important it is to keep a close eye on the detail of the reforms – whilst in this case the short-term impact is positive, there are likely to other ‘quirks of the system’ which are much less welcome."

Supported housing consultant Joe Halewood called for further clarification from the DWP around whether any deductions applied when Universal Credit comes in would be made retrospectively, fearing that claimants could be hit by further deductions for overpayments.

The DWP later confirmed that those people claiming over the cap prior to Universal Credit would not see further deductions because of overpayments when they move over to the new benefit system.

War widows and widowers will be exempt from the cap as will those claiming working tax credit and disability living allowance.

Claimants who have been in employment for 52 weeks or more when they claim benefit will also be exempt from the cap for a grace period of up to 39 weeks.

The cap is expected to deliver £290 million savings in 2013/14 and £330 million in 2014/15.

Last month the Government claimed that some 1,700 claimants who may have been affected by next April's household benefit cap have moved into work with a further 5,000 requesting back-to-work support.

It prompted work and pensions secretary Iain Duncan Smith to say that the "scaremongering about the benefit cap had been unwarranted".

However, the figures were quickly seized upon by experts who said the data was consistent with normal employment flows.