Inflation set to draw extra 35,000 families into benefit cap, charity warns

Benefit cap costs average household £50 a week

Rishi Sunak is facing growing pressure to act amid warnings that spiralling inflation means an extra 35,000 of Britain’s poorest families will lose out on a massive boost to their income.

Already 120,000 households are missing out on an average of £2,600 a year because of the benefit cap, new official figures show.

Analysis by the leading charity Child Poverty Action Group (CPAG) shows that figure could rise to more than 150,000 unless the limit on how much help they can receive from the state is increased for the first time in six years.

The average household misses out on £50 a week, but for a small number of families that figure is more than £300 a week.

As part of a £15bn emergency package last month, the chancellor did announce that those on the cap would receive a £650 one-off cash payment being given to millions across the country.

But he also suggested that they would miss out on a massive boost to their income early next year when benefits are set to rise in line with inflation.

Campaigners and experts, including the highly respected Institute for Fiscal Studies (IFS), have urged ministers to ensure some of the least affluent people in society do not miss out on what could be a double-digit hike in their income.

More than 120,000 households across the UK are affected by the cap, which has not changed since November 2016.

It limits the amount that can be received to £20,000 per year, or £13,400 for single adults with no children. Slightly higher rates apply in greater London of £23,000 a year, or £15,410.

The policy was introduced in 2013 as part of former chancellor George Osborne’s austerity measures. The only time the rates have been changed since then was to lower them.

Famously, ministers did not raise the cap during the pandemic, when everyone on the main benefit of universal credit (UC) was given an extra £20 a week. Many lost out on most or all of that extra help because of the cap.

The average monthly amount that households on UC are capped by was £220 in February, newly published figures from the Department for Work and Pensions (DWP) show.

But around 2,000 were capped by the equivalent of more than £200 a week, including about 320 who were capped by the equivalent of more than £300 per week.

The statistics also show that nearly nine in 10, 86 per cent, of capped households have children.Last month Carl Emmerson, the deputy director of the IFS, told The Independent that if ministers planned to make benefits more generous to keep up with spiralling inflation “the benefit cap should almost certainly increase to reflect that”.

He also said the policy effectively “says we are OK with people who have a few more children in cheap parts of the country and we are OK with people having a bit more expensive housing costs as long as they don’t happen to be children. What we don’t like is people having lots of children in expensive parts of the country.”

The CPAG estimates that abolishing the cap could lift around 50,000 children out of poverty at a stroke.

Chief executive Alison Garnham said: “The cost of living crisis shows that the benefit cap is broken, and needs to go. It has always forced families to live on much less than they need, but as prices spiral the effects are brutal and 298,000 children are among its casualties.

In his cost of living support package the chancellor recognised that families subject to the cap face the same cost pressures as everybody else.  By the same logic, the cap must be removed to help the worst off families stay afloat. Next April’s uprating must be available to every family on benefits, as a bare minimum layer of protection against dramatically higher living costs.

A DWP spokesperson said: “The benefit cap provides a strong work incentive and ensures fairness for hard-working taxpaying households by encouraging people to move into work, where possible.

“We keep the cap under review and any revision would align with the timing of decisions on uprating benefits, with changes taking effect the following April.”