Benefit Cap: 'a clear incentive to work'?

The benefit cap is providing a clear incentive to work, according to new research released by the Department for Work and Pensions today. However opponents say welfare reforms have damaged society and have not produced savings promised by the government.

The Westminster government says it has long suspected that the benefit cap was having a positive impact on people’s lives, compelling them to find work, and that the publications ‘now show this is undoubtedly the case’.

The benefit cap was introduced as part of the government’s long-term economic planso that people on out-of-work benefits do not receive more than the average working family earns.

The research shows that:

• those who would be impacted by the cap are 41% more likely to go into work than a similar group who fall just below the cap’s level, but this trend didn’t exist before the cap was in place – indeed those with higher weekly benefit used to be less likely to move into work
• before the benefit cap fewer than 300 of the highest claiming families got over £9 million in benefits every year – the cap is preventing this and saving millions of pounds a year
• 38% of those capped said they were doing more to find work, a third were submitting more applications and 1 in 5 went to more interviews
• where households said they intended to seek work because of the cap in February 2014 (45%) by August the vast majority of them (85%) had done so – 2 in 5 (40%) of those who said they had looked for work because of the cap in February actually entered employment by August.

Work and Pensions Secretary Iain Duncan Smith said: “We know that the benefit cap has had a real impact in changing attitudes and behaviours, and now we have evidence showing that our welfare reforms are encouraging people into work.

“By putting an end to runaway benefit claims and introducing a system which guarantees you will always be better off in work, we are incentivising people find employment. Every month hundreds of people who have been affected by the cap are making the positive move into work – gaining the financial security and esteem that comes with a job and a pay packet.

“As part of our long-term economic plan, we’ll continue to support people to break free from welfare dependency so they can look forward to a better, more secure future for themselves and their families”.

The DWP cites London as a good example of the policy working.

‘In London where the highest number of people are subject to the benefit cap, scare stories claimed that people would be pushed out of the capital. In actuality, of those capped households living in inner London that moved, 84% continued to live in the central boroughs. In London there is also larger likelihood of capped households moving into work with those in scope for the cap being 70% more likely to go into work than their equivalents just below the cap’.

One interviewee in the research said: “It gave me the shock of my life. But it’s given me the kick I need. I can see what the gentleman was saying, why should we pay for your lifestyle. We should want to work. We shouldn’t sit on our backsides watching Jeremy Kyle. I genuinely do want to work.”

While the government may believe it is on the right track, it’s fair to say that not everyone is convinced that the controversial cap is working, however. Trades Unions, disability rights organisations, charities, anti-poverty campaign groups, churches and opposition political parties all continue to condemn the government’s ‘draconian’ welfare reforms. They point to record numbers of families using food banks as evidence that the welfare reforms are hurting poor families – both in work and on benefits.

There’s also doubt about how much – or how little – money is being saved by the welfare reforms. Today, the Institute for Fiscal Studies said savings from the cap were ‘small’.  They say the cap affects about 27,000 families in the UK – less than 1% of working-age families who receive housing benefits – and saved around £100m a year.

More about the benefit cap

Introduced in April 2013 the benefit cap is set at a rate of no more than £500 a week for couples and families and £350 for single people – £500 a week is equivalent to a salary of £34,000 a year after tax.

Over 50,000 households have had their benefits capped since April 2013 and since then 23,900 are no longer impacted – 12,000 because they have found work or are no longer claiming Housing benefit at all.