A cap on out of work benefits?
The Chancellor has announced a cap on out of work benefits so that “unless they have disabilities to cope with, no family should get more from living on benefits than the average family gets from going out to work”. But what will this mean in practice?
ONS data show that median household income (before welfare transfers) is around £23,305. It also shows that households in the bottom income quintile (those with a median income of £4,970) receive an average of £8,614 annually in state welfare payments. The cap means that no out of work household will recieve more than 2.7 times more than the average amount currently received by those who are worst off.
This cap is therefore unlikely to affect many households (presuming that it is in addition the large scale Housing Benefit cuts that the Government has already announced). But undoubtedly it will mean benefit cuts for a few – most likely, as state welfare payments are based on need, those with large numbers of young children living in very expensive areas of the country.
Adminstering the cap is likely to be extremely complicated, as the Government will have to decide which benefits will be cut once total entitlements raise over a certain amount (Child Benefit if the family has an additional child? Child Tax Credit?) and will also be affected by factors outside of claimants’ control – if CPI rises far more quickly than earnings then will claimants face benefits cuts? It is arbitary, unfair and will inevitably impact on families with children (out of work households without children recieve the meanest benefit levels – JSA for a single person is only £65.45 a week). But more than anything else it is political – much as the Daily Mail would have us believe otherwise, there are very few out of work families who recieve anything like this sort of of income.
Update: The Guardian are reporting that around 50,000 families will lose £93 a week as a result of the cap, and that Disability Living Allowance payments, non-cash benefits (like free school meals) and one-off payments will not be included. It is unclear whether or not benefits that can be recieved in and out of work will be included (e.g. Child Benefit) or wider disability benefits are exempt (for example Employment and Support Allowance or Industrial Injuries Disablement Benefit). They also report that it will mainly be Housing Benefit that is subject to the cap – whether this means that the cap is in addition to existing HB cuts, or is simply a concequence of them, remains uncertain. We will report more here as information becomes available.