15 Apr 2013

Benefits cap begins in London

A cap on the amount of benefits people can receive on a weekly basis begins in London today amid a row over whether it will change behaviour.

The government is introducing a cap on benefits because it wants to ensure that workless households do not receive more than the average income of a working household.

A pilot of the benefits cap begins today in four London boroughs – Croydon, Bromley, Haringey and Enfield – and the plan is to roll out the scheme nationally in July.

Under the new rules, couples and single parents will receive no more than £500 a week in benefits – equivalent to £26,000 a year. The limit for single people will be £350.

The days of outrageous claims giving people incomes far above those of working families are over. Iain Duncan Smith

Work and Pensions Secretary Iain Duncan Smith said last week: “The benefit cap sets a clear limit for how much support the welfare state will provide – the average wage for working households.

“But it’s also a strong incentive for people to move into work and even before the cap comes in we are seeing thousands of people seeking help and moving off benefits.

“We have a very clear message: we will provide support to those who need it, but the days of outrageous claims giving people incomes far above those of working families are over.”

Behaviour row

The government said last week that the number of people expected to be hit by the changes had fallen from 56,000 to 40,000, with 8,000 getting jobs through JobCentre Plus.

But some have disagreed with Mr Duncan Smith’s claims that the benefits cap was already a “strong incentive” to get people into work.

Jonathan Portes, director of the National Institute of Economic and Social Research and a former chief economist at the Department for Work and Pensions, said there was “no evidence at all” that the cap had affected behaviour.

Stephen Timms, Labour’s shadow work and pensions minister, said: “We desperately need a change of direction. Labour has called for a compulsory jobs guarantee to give the long-term unemployed a job, which they will have to take up or lose their benefits.”

Who will be affected? 
The cap applies to the combined income from the main out-of-work benefits, plus housing benefit, child benefit and child tax credit.

Any households entitled to working tax credit are exempt from the cap, as well as anyone in receipt of disability living allowance; personal independence payments; attendance allowances; the support component of ESA; industrial injuries benefits (and equivalent war disablement pensions and payments under the armed forces compensation scheme); and war widows and war widowers pension.

Claimants who have been in employment for a year or more when they claim benefits will also be exempt for up to 39 weeks.

Source: DWP factsheet

The benefits cap has already caused big rows in government, with London mayor Boris Johnson saying in 2010 that he could not accept “any kind of Kosovo-style social cleansing” as a result of the changes. He later backed down, but stressed that London has particular needs which it was his role to point out.

Critics say that people on benefits will no longer be able to stay in their homes, particularly in expensive areas like London and the south east, because housing benefit will no longer cover their rent. It is also argued that the £26,000 cap takes no account of how many children there are in a family.

Dealing with the impact

In some areas, councils are already taking steps to try and deal with the impact on their populations. For example, Greenwich Council has a scheme to help those most at risk of losing their homes as a result of the changes.

The Labour-led council has already recruited 31 people who start full or part-time jobs with the council this month, on the living wage, in teams covering parks and open spaces, street cleansing, recycling, enforcement and in-town centre management.

It is a new phase for the council’s Greenwich Local Labour and Business (GLLaB) scheme which the council says has already helped 12,000 residents back into work.

Councillor Chris Roberts, leader of the Royal Borough of Greenwich said: “The development of this scheme demonstrates very clearly that the majority of people are desperately keen to get back into work. Far from the media caricature, we are dealing with parents who love their children and want to get off benefits and into work. All they need is the opportunity to do so…

“We do not believe it is in the best interests of families to move out of London to areas of the country where there are likely to be fewer jobs in the long-term and which will also result in the disruption of their children’s education.”