This briefing explains how the household benefit cap operates and considers evidence of its impact to date. It goes on to consider the Government's proposal to reduce the cap from £26,000 to £23,000 per year and the potential impact of this on claimants.Jump to full report >>
As part of the October 2010 Spending Review the Coalition Government announced an intention to cap total household benefits at £500 per week for a family (£26,000 per year) and £350 per week (£18,200 per year) for a single person with no children. Households with income from benefits in excess of these caps experience a reduction in their Housing Benefit entitlement.
Measures to introduce the cap were included in sections 96 and 97 of the Welfare Reform Act 2012 and the Benefit Cap (Housing Benefit) Regulations 2012. Implementation was somewhat delayed but it was fully rolled out by September 2013. Provision for a benefit cap has also been included in the Universal Credit Regulations 2013.
The benefit cap was one of the Coalition Government’s welfare reform measures aimed at deficit reduction. The key aims were to:
Between its introduction and February 2015, 58.7 thousand households experienced a reduction in their Housing Benefit as a result of the cap. As expected, most of the affected households were larger families and/or lived in a high rent area. The majority of the affected households lived in London (45%). The Coalition Government declared the policy a success on the basis that 22,000 of the affected households “have moved into work, reduced their Housing Benefit claim or [are] no longer claiming Housing Benefit at all.”
A commitment to reduce the cap from £26,000 to £23,000 (£440 per week for familes with children) was included in the Conservative Party’s 2015 Manifesto after being initially announced as part of a package of measures aimed at funding three million apprenticeships during the Party’s 2014 Conference. Briefing notes on the 2015 Queen’s Speech refer to the introduction of a “Full Employment and Welfare Benefits Bill and other legislation” to encourage employment by capping benefits. In addition to emphasising the number of houseolds who are no longer affected by the cap as an indication of its success in incentivising work, the Government has referred to the wide public support it attracts.
Social landlords, whose tenants are heavily reliant on Housing Benefit to meet their rent commitments, are concerned that a lower benefit cap will render a substantial number of their homes, particularly those let on affordable rents (rents of up to 80% of market levels), unaffordable in London and the south east. In turn, they argue that an insecure rental stream could have implications for attracting private funding for the development of new affordable housing.
Commons Briefing papers SN06294
Author: Wendy Wilson
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