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Lowering the benefit cap - Citizens Impact Assessment

24 July 2015

The Government has set out plans to lower the overall benefit cap to £23,000 per year, in effect capping the amount of money a household can receive from benefits at £442 per week .  It is vital that policymakers fully understand the potential impact of the change.

Citizens Advice has been helping clients with the programme of welfare reform implemented over the last parliament. Our evidence therefore provides extensive insight into the challenges already presented, the issues affecting our clients now, and the likely impact of ongoing reform in the future.

  •  The benefit cap was implemented at £26,000 per year in April 2013. Research on the impact of this cap has allowed us to produce some estimates of the potential impacts of lowering it to £23,000.
  • The current cap disproportionately affects households in high rent areas, women, and ethnic minorities.
  • There is evidence that there has been a small positive labour market effect as a result of the £26,000 cap. After a year, those affected are 4.7 percentage points more likely to be in work with a Working Tax Credit claim than their counterparts who claim out-of-work benefits at an amount just below the cap.

However there are significant limitations to the benefit cap as means of moving large numbers of households into work.

  • An estimated 150,000 adults and 395,000 children will be affected by the £23,000 cap, including those who are already capped at £26,000.
  • The overall trend will be of smaller families being capped all over the country, and very small families in high-rent areas being capped.
  • Families who need four bedrooms to house themselves adequately will find that their housing benefit will no longer cover the cost of private sector rent in any part of the country.
  • The benefit cap extends welfare conditionality system to types of households that are usually not expected to work, such as lone parents of very young children. This introduces inconsistencies into welfare conditionality policy.
  • If the cap is to be lowered, it is vital that sufficient and proportionate Discretionary Housing Payment is made available to Local Authorities to enable households the breathing space take action or adapt to their reduced income.

Local Authorities should learn from best practice in use of DHPs and supporting households who are affected.