One of the most controversial moves in the government’s benefits shake-up begins today.

The plan to cap total benefits at £500 a week for most couples and single parents and £350 for single people is being trialled in four London boroughs: Croydon, Bromley, Haringey and Enfield.

If the cap is considered a success it will be introduced across the country from July this year.

The government’s line has always been that the change will encourage some households who make excessive welfare claims to either start working or cut their housing benefit bill by moving to cheaper accommodation.

Iain Duncan Smith says the latest research from the Department of Work and Pensions (DWP) suggests this is already happening, with 8,000 people who were facing cuts under the cap moving into work instead in recent months.

But Jonathan Portes, a former DWP chief economist who is now director of the National Institute of Economic and Social Research, said: “There is as yet no evidence one way or the other that there is behavioural change.”

And now the TUC has called on the statistics watchdog to investigate claims that Mr Duncan Smith misrepresented the official figures.

A tangled web. Can FactCheck unravel it?

“Already we’ve seen 8,000 people who would have been affected by the cap move into jobs. This clearly demonstrates that the cap is having the desired impact.”
Iain Duncan Smith,  April 12 2013

There’s nothing wrong with the first sentence, if DWP’s latest figures are to be believed.

Jobcentre Plus staff rang 82,000 people over the last year to warn them that they were likely to see their incomes slashed thanks to the benefits cap.

Of those people in the danger zone, 25,000 “accepted an offer of help” from advisors, and 8,000 people found a job.

The problem with the second half of Mr Duncan Smith’s claim is that we don’t know for sure that the one caused the other.

Some or all of the people who found work in this period might have done so anyway even without the threat of the benefit cap.

That is a point DWP researchers made when they published these figures, saying: “The figures for those claimants moving into work cover all of those who were identified as potentially being affected by the benefit cap who entered work. 

“It is not intended to show the additional numbers entering work as a direct result of the contact.”

So Mr Duncan Smith is wrong about the strength of the evidence. That doesn’t mean he’s wrong to say that the imminent introduction of the cap has spurred some claimants into finding work.

We can’t say one way or the other unless we know what the normal “churn” – the percentage of people who leave benefits – is over the timescale of this analysis.

Another new piece of DWP analysis says only 40,000 households will be hit by the benefits in 2013/14 rather than 56,000, as was previously thought.

The researchers put this fall down to various policy changes and methodological improvements as well as “underlying caseload changes, due to normal benefit caseload churn”.

There’s no mention here of a change in behaviour caused by the benefit cap, just “normal benefit caseload churn”.

It appears that these two pieces of work were done entirely separately and the number-crunchers who updated the impact assessment weren’t asked to look for any evidence of behavioural change.

If these new figures are right, Alison Garnham, chief executive of the Child Poverty Action Group (CPAG), must be wrong when she says:

“About 190,000 children are affected compared to about 80,000 adults.”

These numbers were based on the old figures, as laid out in a previous impact assessment, before the estimate of the total number of households affected was lowered from 56,000 to 40,000.

The ratio of children to adults may well be similar but the numbers for both must be too high.

Ms Garnham also suggested that, rather than being an incentive to find work, the cap will have exactly the opposite effect of the one Mr Duncan Smith is claiming.

She told the BBC:

“The difficulty with cutting people’s benefits is that it tends to have the opposite effect. It tends to make people poorer and therefore in a less good position to move into paid work.”

The logic of this is that if you have less money, you spend more time worrying about scrimping and saving and have less time to apply for jobs.

But we have to point out the CPAG, like Mr Duncan Smith, have yet to produce any hard statistics which proves that their case is true.

If we come across any hard evidence that shows whether cutting people’s benefits makes them more or less likely to find a job, we’ll update.

By Patrick Worrall