Benefit cap introduction ‘saw claimants spend less on children and essentials’

The Institute for Fiscal Studies said only about 5% of capped households had an adult move into paid work as a direct result of the benefit cap.

The DWP has published evidence on the impact of the benefit cap (Dominic Lipinski/PA) (PA Wire)

The introduction of a cap on benefits saw claimants spending less on their children and essentials such as heating and food, a Government-commissioned evaluation found.

Anti-poverty charities have repeated calls for the “arbitrary, cruel” measure, which caps the total amount that some working-age families can receive in benefits, to be scrapped.

While the reduction saw some people move into paid work, move home or onto a benefit that exempted them from the cap, the vast majority – about 90% – of those affected did not and therefore just experienced a reduction in income, a think tank involved in the research said.

Around five in 100 capped households had an adult move into paid work as a direct result of the benefit cap

Carl Emmerson, IFS

The new findings looked at the impact of the reduction in the benefit cap between November 2016 and January 2017 from £26,000 for those with dependent children to £20,000 outside London and to £23,000 in the capital.

The Institute for Fiscal Studies (IFS) noted the publication of the report was delayed significantly, having been originally due in 2019, and that the cap has since increased in line with inflation this year.

It is now at £25,323 for couples with or without children or single claimants with a child of qualifying age in Greater London and £22,020 elsewhere in Great Britain.

The Department for Work and Pensions (DWP)-commissioned evidence, which was peer reviewed by IFS researchers, suggested common impacts of the cap included reduced spending, falling into debt and borrowing from friends or family, the think tank said.

A survey of affected claimants in England, Scotland and Wales was conducted approximately seven months after it was first brought in and then six months later.

These showed that in the first survey more than half said they had had to reduce their spending on essentials, almost half said it had impacted their health and 41% said they reduced spending on children.

These percentages dropped in the second survey but remained at a third or above for each issue.

The DWP evidence published on Thursday stated that despite many reported impacts decreasing over time “nearly half of respondents felt that the financial impact of the benefit cap had become worse compared with six months ago”.

Carl Emmerson, deputy director at the IFS, said only around 5% of capped households had an adult move into paid work as a direct result of the benefit cap.

He said: “The benefit cap – which in November was set at £20,000 for those with children outside London, and £23,000 for those with children in London, and applied to 112,000 households – increases incentives to move into paid work, to move home or to move onto a disability benefit that exempts a household from the cap.

“The DWP study published today shows that each of those responses have occurred. In particular, around five in 100 capped households had an adult move into paid work as a direct result of the benefit cap, with this impact being bigger among those who are capped by a bigger amount, and those with pre-school children.

“But about 90% of capped households do not respond in any of these ways – and presumably were having to find other ways to manage with a lower income. Indeed an accompanying study also published by DWP today suggests that common impacts include reduced spending, falling into arrears on bills, and borrowing from friends or family.

“In November 2022, on average, affected households lost £50 of benefit income per week due to the cap and a small number saw very large reductions; almost 1,000 households saw their monthly universal credit award reduced by more than £1,000.”

Anela Anwar, chief executive of anti-poverty charity Z2K, said: “These reports demonstrate that DWP is well aware of the devastating impact of the benefit cap, but has chosen to continue to deny more than 100,000 households the benefits they’re due.

“The cap is still far below its original level set a decade ago, forcing people to go without essentials and damaging their health.

“There is no place for the benefit cap in the social security system: it’s arbitrary, cruel and denies people the chance of dignity and stability. DWP should scrap the cap.”

Imran Hussain, director of policy and campaigns at Action for Children, said the benefit cap “only results in making poor families poorer and makes it harder for them to escape the misery of hardship”.

The charity referenced its own analysis which it said showed that scrapping the cap “would pull around 100,000 out of deep poverty, or 80,000 children from very deep poverty”.

Mr Hussain said: “If the Government abolished the benefit cap and increased the child element of universal credit by £15 a week, it would lift nearly 320,000 children out of poverty altogether.

“At £4 billion a year, it’s a bold yet realistic and affordable reform – and would help give many more children a brighter and more prosperous life that benefits everyone.”

A DWP spokesperson said: “We are committed to protecting the most vulnerable which is why benefits, including universal credit, and the benefit cap, have gone up by 10.1% this month and we have provided more than £94 billion over 2022-23 and 2023-24 to help people with higher bills – an average of over £3,300 per household.

“As these reports show the benefit cap provides a strong work incentive, balancing fairness for hard-working taxpayers and encouraging people to move into work where possible.”