Commons committee calls for overhaul of ‘cruel’ benefits cap

Damning report says government “doesn’t have the objective or moral grounds” to keep the cap.


Just hours after Work and Pensions Secretary Amber Rudd committed to the benefits freeze for another year, the Commons work and pensions committee released a damning report saying four in every five families must be made exempt from the “cruel” cap.

The committee says nothing less than a major overhaul can make the £20,000-a-year limit apply only to those expected to look for work – that would exempt 82% of claimants, many of whom have seen their benefits cut.

In the report, the committee urges a government that “doesn’t have the objective or moral grounds on which to maintain its position” toward a series of measures including exemptions for all in temporary accommodation and monitoring the extent of cap-related debt.

As reported by 24housing, Rudd yesterday (11th March) told the committee “the cap stays” until next year at least, ending speculation of a thaw coming in tomorrow’s Spring Statement.

The committee report says struggling claimants have no way to escape a cap that “does not stand up to scrutiny” while being unclear as to actual extent of its savings.

DWP minister Justin Tomlinson is singled out for a “flippant” claim that claimants avoided the cap by renegotiating rent or taking in a lodger.

Referencing “harrowing stories” heard by the committee of claimants going hungry, parents struggling to feed their children, homes without heating and crippling rent arrears, the report said government must now look at the impact of the benefit cap in the round.

Imposed in 2013, the cap – £23,000 in London and £20,000 outside – has been blamed for “social cleansing” of inner-city areas.

The cap was cut in 2016 on the basis of “even greater fairness” and to “further improve work incentives for those on benefits” to “build on the successes of the existing benefit cap, as shown by evaluation evidence”.

Some 73% of the 58,000 people who had housing benefit capped in November were single parents – and the majority had at least one child under five.

The DWP claimed the cap saved 0.1% of the total welfare bill – but the committee found this figure did not include the “additional costs” it created.

To the committee, the cap must apply only to those DWP has assessed as capable and expected to look for work, after evidence shows only 18% of those currently hit by it fall into that category.

The report also finds that the cap will cut more deeply under Universal Credit, where it can eat into all of a household’s income – not just housing costs as in the existing system – including into money meant for children or people currently too ill to look for work.

And claims to the cap’s “positive” employment effect are, the report says, marginal: for every 100 households affected by the cap, around five will have moved into work because of it.

The report describes DWP repeatedly “over-claiming” the employment benefit of the cap, with the UK’s Statistics Authority questioning the Department’s use of numbers and the Committee warning it against repeating some of its claims.

Conversely, the evidence to the inquiry showed that the cap disproportionately impacts households that DWP itself has already assessed as facing barriers to work – mainly childcare and health problems – that exempt them from the requirement even to look for it.

Latest DWP stats show that in November last year, just 18% of claimants who had their benefit capped were claiming Job Seeker’s Allowance, the benefit for which claimants are expected to be actively seeking work. Put another way, 82% of capped households have no work or even job search conditions attached to their benefits.

The Committee notes: “Few of these claimants will be comforted by the Minister’s flippant suggestions (in evidence to the Committee) that they simply move house, renegotiate their rent or even take in a lodger. In reality, they are left with no way to escape the cap…A policy aimed at people who could work but were choosing not to is now being applied to single mothers with newborn babies and people with serious health conditions.”

Committee chair Frank Field said: “It would be difficult to think of a more cruel cut. Benefits are being cut with the aim of driving people into work, but four in five people bearing this cut aren’t expected to work. What genius in government thought this one up?”

“The claim about fairness is almost equally unconvincing. Families in work were already better off than similar families who were out-of-work, without the cap.

“Government set the cap by referring to earned income, without taking into account the additional  benefits that in-work families can receive.”

The Committee concludes that, to reconcile the cap with its own stated objectives, it should only apply to claimants who are either claiming JSA or claiming UC and in the “all work-related” activity group.

And the report acknowledges a recurring theme in evidence across the Committee’s welfare inquiries: benefits are already set at levels “inadequate” for basic living costs, harshly compounded by policies including the cap, sanctions, and the real income losses in the transition to Universal Credit.

The Committee says that government should increase the new, restricted caps to take account of in-work benefits, as well as earnings, in the calculation, and should also ensure the cap is uprated in line with inflation.

Before Universal Credit, only Housing Benefit could be capped, but under UC it is not only a household’s housing costs payment that can be reduced but its whole award, cutting into the household’s whole income—even into money meant for children.

The little money these households have left can be further reduced by deductions to their UC awards, for example to repay the ‘advances’ people took to tide them over the minimum five-week wait for a first UC payment.

Before the committee yesterday, Rudd refused to recognise these advances as debts by definition, effectively echoing the government response that that this is how ‘reform’ is supposed to work.

But the report referenced “extreme but real” instances of families left with so little, their children are being taken into care because of neglect.

As such, the committee says government must “ring fence” certain elements of UC to protect against these “appalling effects”.

It is “wholly unacceptable” that the problems of alignment between working claimants’ payday and the UC assessment period can mean people who are earning enough to escape the cap are capped anyway – suffering significant financial losses simply because of a fundamentally flawed administrative process, the report says.

Heidi Allen MP, Committee Member, said: “All government policy must be based on evidence, yet there is scarce evidence to suggest the cap is moving people into work – not least because 82% of those affected by the cap are not in any case expected to work because of health or caring responsibilities.

“This cap and the benefits freeze are outdated policies, not taking into account the increased cost of living since their inception.

“Bluntly, the government doesn’t have the objective or moral grounds on which to maintain its position.”

Allen told yesterday’s committee session that voting for the freeze was one of  the “biggest regrets” from  her time as Tory MP, admitting she had been naive when she voted for the policy weeks after winning her seat in the Commons in 2015.

Now siting as an Independent, Allen said: “It’s my one regret that I voted for (the freeze).

“My lack of knowledge let me down.”

Another emerging theme recognised by the report is government cost shunting, where the DWP repeatedly claims the benefit cap is saving money, but the claimed savings of £190m a year are just 1% of  expected savings from welfare reforms since 2010, and a  mere 0.1% of the total welfare bill.

To the committee, even these small savings are likely to be an overestimate.

In recognition of the hardship caused by the cap, DWP gives back a significant portion of the money it takes from claimants to local councils, for Discretionary Housing Payments.

The report says this ‘circular process’ of transferring public money from one budget to another – a straightforward administrative issue for the DWP – fails to consider the huge impact on families left relying on less stable support.

And the DWP does not even include these costs in its figures, nor does it consider the increased costs to councils, the report says.

Councils are acknowledged by the committee as working – often at the expense of their own resources – to identify and support capped households to help families mitigate some of the hardship the cap creates.

To date, councils have been able to target capped households and offer support using Housing Benefit data that indicates which households are subject to the cap.

But councils told the committee they cannot do this for UC because the DWP does not provide them with the equivalent UC data.

The report says it is “unacceptable” that the DWP is effectively hindering council efforts to provide support capped households “desperately need”.

This, the report says, places households on UC at a “significant disadvantage” compared to those on legacy benefits.

In an initial response, the DWP says the benefit cap “restored fairness”, but it would “carefully consider” the report’s findings and respond in due course.

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