From the TUC

Three quarters of the people hit by the Benefit Cap are children. Things just got even worse

07 Nov 2016, by in Society & Welfare

Today, the government took another step to increase the number of children in poverty. They have done this by cutting the Benefit Cap, first introduced by the Coalition government. Outside London, the number of people in need whose benefits are cut is likely to go up by more than 700% and even in London the increase will be over 100% (that is, more than doubled). One third of a million children in families already struggling with low incomes will be made poorer.

The Benefit Cap is a maximum amount of a benefit a family can get, and up till today it stood at £500 a week for couples and families with children and £350 for single people with no children. A lower Cap was part of the Conservative manifesto at the last election and today it is being introduced in the areas where the fewest people are likely to be affected over the next three months it’ll be extended across the country. The new levels are £23,000 in London and £20,000 elsewhere for families with children and £15,410/£13,400 for single childless people.

The Benefits Cap is a bit like the Poll Tax, which charged you the same amount, no matter how high your income was: the Benefit Cap puts the same ceiling on the amount of benefit you can get, regardless of your level of need. Pensioners are excluded and the calculation of benefit income doesn’t include some disability benefits but it does include Employment and Support Allowance for people in the work-related activity group and Housing Benefit (including HB claimed by disabled people).

The latest official statistics (for August) show that 42% of the families affected are losing more than £50 a week – one in six are losing more than £100 a week.

Numbers of Affected Families By Bands of Amount Lost Per Week

Up to £50 £50.01 to £100 £100.01 and above
11,713 5,054 3,272

That’s a snapshot for one month, but it isn’t unusual, if you look at the cumulative figures for everyone who’s ever been Capped, you get similar figures – 43% losing more than £50 a week, 18.6% losing more than £100.

As for who is being hurt, the answers are reasonably clear. Firstly, it’s lone parent families: 66.8% of Capped households have a single adult with one or more children. Secondly, it’s families in London – very few people get £500 a week in benefits unless they get Housing Benefit to pay for high rents, and London has staggeringly high rents; in the latest figures, 42.1% of Capped families live in London. Thirdly, it’s families with children – in the latest figures, just 5.8% of Capped households are single adults or couples without children.

But, most important of all, it isn’t just families with children, it’s children themselves. The Benefit Cap figures give us numbers for how many capped households had 0, 1, 2, 3, 4 or “5 and above” children. Take the August figures, and we can work out how many children lived in families in each of these groups, except the last, where we know the minimum number of children:

Number of households of different size and number of children, August 2016
Size of family 0 1 2 3 4 5 and above Total
Number of households 1,162 576 1,905 4,203 5,252 6,940 20,041
Number of children 0 576 3,810 12,609 21,008 34,700 72,703

We can carry out a similar exercise for adults, using the figures for different types of family:

Number of households of different size and number of adults, August 2016
Type of family Single, no child dependant Single, with child dependant(s) Couple, no child dependant Couple, with child dependant(s) Total
Number of households 1,144 13,378 18 5,504 20,041
Number of adults  1,144  13,378  36  11,008 25,566

In August 2016 there were 25,566 adults affected by the Benefit Cap and at least 72,703 children: 74.0%. If you carry out the same calculations for the cumulative figures you reach totals of 109,298 adults and 271,988 children – 71.3%.

What is the impact of the changes that start today? It doesn’t sound like much, a cut of £3,000 in London, £6,000 elsewhere, but this is one of those deceptive changes that seems small when you hear about them but turn out to be much larger when you work out what is going to happen. This is because there are a significant number of families receiving just below the old thresholds and because rents are rising very quickly –according to the ONS experimental index of private rental prices, rents rose by 2.3% in the year to August, compared with CPI inflation for the same period of 0.6%.

What’s as worrying is that estimates of how many people will be affected have gone up significantly. In August, the DWP published an impact assessment that forecast that 88,000 households would be hit, an increase of 64,000, costing these families £65m in 2016/17 and £155m in 2017/18. These households would include 107,000 adults and 244,000 children – 69.5%. This would bring the total number of children hit by the Benefit Cap to over 300,000. The Department calculated that the median weekly loss would be £49; assuming the family’s benefit income is being cut to the Cap level of £442.31/£384.62, that would be 11.1% in London, 12.7% elsewhere. Households that are already Capped “will lose a further £62 per week from the change”.

That is bad enough, but today the Chartered Institute of Housing has published a new report, arguing that the number of Capped households will in fact rise to 116,000 “one to four child families”, with 319,000 children. That is, to deal with the fact that we don’t know exactly how many children are in larger families than this, they have been excluded from the study, so the number of households and the number of children will be significantly more than this. In 23% of local authorities an average couple with two children renting privately will lose more than £50 a week; for couples with three children this rises to 98%. Council rents tend to be lower, but even for Council tenants a couple with three children will be at least £50 a week worse off in 37% of local authorities.

Joe Halewood, who has forgotten more about the Benefit Cap than I’ve ever known, points out that the impact on social housing may be the worst aspect of this change. Seventy five per cent of social tenants rely on Housing Benefit, and three bedroom properties account for 36% of social housing. But three bedroom flats and houses in many parts of the country will now be unaffordable for people who rely on HB.

The changes that begin today will mean that the impact of the Benefit Cap is much less concentrated in London.

Increase in number of Capped households in different regions
Region  Current Cap  DWP forecast  CIH Forecast  
North East 580 4,000 5,293
North West 1,439 9,000 12,854
Yorks & Humber  1,182 7,000 9,206
East Midlands 820 5,000 7,077
West Midlands 1,737 10,000 12,031
East of England 1,371 8,000 11,927
London 8,444 19,000 18,059
South East 2,104 11,000 17,676
South West 937 5,000 9,272
Wales 617 4,000 5,844
Scotland 806 5,000 6,733
Total 20,037 88,000 115,972

In London, the number of Capped households will more than double. In other regions and nations the increase ranges from sixfold to ninefold. If, as at present, there are an average of around 3.6 children and 1.3 adults per household, the CIH figures suggest 4 – 500,000 children and 140 – 150,000 adults suffering the Benefit Cap – over half a million individuals in all. As these are families that are already hard up, it is inevitable that there will be a significant increase in child poverty – which the government is supposedly committed to reducing.

Rough number of people affected by Benefit Cap after changes (CIH forecast)
Region  Adults  Children  Total  
North East 6,900 19,100 25,900
North West 16,700 46,300 63,000
Yorks & Humber 12,000 33,100 45,100
East Midlands 9,200 25,500 34,700
West Midlands 15,600 43,300 59,000
East of England 15,500 42,900 58,400
London 23,400 65,000 88,500
South East 23,000 63,600 86,600
South West 12,000 33,400 45,400
Wales 7,600 21,000 28,600
Scotland 8,800 24,200 33,000
Total 150,700 417,400 568,200

This could be devastating and the government does not give the impression of being prepared for an increase in poverty on anything like this scale.

3 Responses to Three quarters of the people hit by the Benefit Cap are children. Things just got even worse

  1. Postkey
    Nov 8th 2016, 9:45 am

    The net ‘saving’ is much less than the gross ‘saving’?

    In the financial year ending 2015, the individuals on the lowest decile of income {table 2a} payed, back to the exchequer, on average, 46.84% of their gross incomes in taxation {direct and indirect}.

    https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/datasets/theeffectsoftaxesandbenefitsonhouseholdincomefinancialyearending2014

    Hence the net cost of benefits is much lower than the gross cost of benefits.

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