Benefit cap surge is a warning of worse to come

Originally published as a column for Inside Housing on August 7.

Step away from planning reform for a few moments and grim news out today (Thursday August 6) reveals a more immediate crisis in the benefits system with even more alarming implications for the future.

Figures published by the Department for Work and Pensions (DWP) show that the number of households subject to the benefit cap almost doubled to 154,000 between February 2020 and May 2020. Of those, 140,000 had children.

More households have moved on to Universal Credit over time so the grey line for total capped households is the one to watch – note that the increase is much bigger than when the benefit cap was reduced in 2016.

Capped households

The 93 per cent increase seems to have been driven by the first impacts of Covid-19 on employment for families who fell through the gaps in the furlough scheme for employees or income support scheme for the self-employed.

But it actually understates the real impact: the number households who were capped for the first time increased by an incredible 500 per cent between February and May from 14,000 to 84,000.

Newly capped households

The increases are partly the result of the surge in claims for Universal Credit that happened immediately after the Coronavirus lockdown.

But they are also an unintended consequence of the temporary increases in Universal Credit and Local Housing Allowance (LHA) at the same time as the furlough scheme in March.

Unfreezing LHA and then restoring rates to the 30th percentile may have been very welcome moves for private renters but it also tipped many more of them into the cap and may even have made them worse off as landlords increased rents to match.

Benefit cap rates are £20,000 for a family (or £23,000 in London) and £13,400 for a single person (£15,410 in London).

In Harlow, for example, the LHA rate for a one-bed flat increased from £614.59 a month to £720.01. The landlord of one of the town’s converted office blocks then increased its rent for one-beds from £612 to £718.

That plus Universal Credit was enough to take a single tenant over the £13,400 benefit cap for single people outside London. More generous LHA left them £13 a month worse off.

Others will have lost far more than that elsewhere: the figures out today show that households had their benefits capped by an average of £57 a month.

All this is the entirely intended consequence of the failure to increase the benefit cap at the same time as other benefits.

Another factor may be holes in the ‘grace period’ that is meant to protect people who have been in employment for the previous 12 months from being capped for the next nine months.

The small print says that you have to have earned at least £604 a month over those 12 months, which may be too much for people on irregular or zero hours contracts.

There is also some anecdotal evidence of the DWP failing to apply the grace period when it should.

And getting another job quickly has just got dramatically harder, with adverts that used to attract a dozen applications now getting hundreds.

Today’s figures only reflect the period immediately after the lockdown and there are even bigger challenges to come as the furlough and income support schemes are phased out between this week and October.

The number of people claiming out-of-work benefits has already risen to 2.6m and another 8m are on those support schemes that are about to end.

The benefit cap always was always  a cruel system based on a bogus definition of fairness, divisive language about strivers and shirkers.

Ministers gave false assurances about its impacts at the time it was introduced and told us in the Spring that few people losing their jobs because of the pandemic would be affected.

That was clearly wrong. Combine it with the restart of possession actions later this month and millions could be about to face destitution and homelessness.


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