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Benefits Blog

by Tombenefits

news and thoughts from the world of welfare rights
08 November 2016 at 17:13

Caps and cuts 1 - the Benefits Cap

A November 2016 update of part 1 of this 2 part blog first written in July 2013 when the Benefits cap was coming into force. The main change in 2016 is a reduction in the levels of the cap and a risk that it will affect more people.

Welcome to a two part blog looking at two related caps on benefits, both  in the name of fairness to those in work, that break with two historic principles of social security.

 

Here’s hoping you had an enjoyable thunderstorm in your parts if you like such things or escaped them if you don’t.

 

Just to prove to myself that I can blog about something other than PIP, I’m tackling something completely different this time. Most hip and happening of the moment is the Benefits Cap which was rolled out across much of the UK from July 15th and will be fully national by September.

 

A briefer follow up blog Part 2 look at the more quietly introduced and related “Benefits Uprating Cap” which snuck in quietly this April, after a bit of Autumn budget discussions about workers, shirkers and curtain arrangements.

 

Both were proposed for the same reason : that people on benefits may be enjoying an advantage not available to those in work. Both have similar double edged effects: if affected you stand to lose money, but also it makes being a claimant feel a little more stigmatised in a seemingly less sympathetic hard times. 

 

The changes break with two key principles of social security, namely that:

 

1.       entitlement to means tested help should only be based on an assessment of need and resources

 

2.       the poorest in society should at least be protected from real cuts in income, even during hard times for us all

 

 

The Benefits Cap

 

The basic principle is that no household should get more than the median wage -  £350 a week take home for single person, £500 for a couple. Thats £18,000 a year for singletons and £26,000 for couples/lone parents. On the face of it that seems fair enough and many are astonished that benefits could ever approach such levels. Indeed there are rumblings  - stage right - that the cap needs to be bought to a much lower level.

And that is what has happened from 7th November 2016 with both a reduction in the cap and a lower again rate outside of Greater London: the new rates are:

 

  - £23,000 for couples and lone parents in London and £15,410 for singles

 

  -  £20,000 for couples/lone parents outside Greater London and £13,400 elsewhere

 

 

 As the Secretary of State put it:  "You cannot go on earning more money [while] out of work on benefits than those in work trying hard."

 

It has a rough and ready fairness about it and is hugely popular in the opinion polls, so all parties are signed up to it. However the numbers actually affected were quite small – some 65,000 households – as are the anticipated savings £50 million a year. In fact other parts of Government estimated that additional costs from disruption if families are forced to move or are made homelessness, so it’s a moot point if there are any savings at all. The importance is perhaps more symbolic and political rather than financial.

 

The tightning of the cap from November 2016 will expand the numbers nearer to 200,000 and 4% of claimants as well as up the savings to the treasury budget to nearer £450 millio. But also the costs of picking up the pieces although these may fall more on local government. 

 

How come anyone on benefit gets anything like average earnings?

 

The reality is that only a very small proportion of claimants do. We are talking some 65,000 households and a saving of only some £50 million. Basic benefits levels are frozen effectively at 1960s subsistence levels set at 1960s subsistence levels. For example a single person has to make ends meet on £73.10 in 2016/7 for all food and bills, bar the rent and a couple £114.55. The restriction then freeze actually means these amounts now represent a 6% real cut affecting all "working age" benefits recipients.

 

However, all over the land, people feeling the pinch in work are being  left with a false impression that vast numbers of claimants are getting as much - or nearly as much - as they are, while reclining on the chaise longue eating a grape or two....

 

The only reasons why you might even approach median earnings when your main income is from benefits are:

 

1.      High rent - You - or rather your landlord - are receiving large amounts  for help with the very high levels of rents (mainly in London and the south east) which result of housing market/policy failure in the last 20 years. Existing Housing Benefit restrictions already restrict you to the cheapest 20 to 30% of properties in your area

 

2.      Extra disability costs – Your benefit includes extra amounts to help with the extra costs of living with a disability. To get anywhere near the cap on this reason alone, there might need to be several people with disabilities – and the extra costs that go with these – and/or someone on the highest rates reflecting the most severe level of disability. You would though be exempt from the cap if someone in your household receives a "disability benefit"

 

3.      Larger families - You - and a partner – look after a number of children. This may be the result of second marriages bringing two households together or larger families planned while working.  Overall the cap will hit seven times as many children as adults. There are though only a tiny number of supersized families of media fame; on average families are no larger for those taxpayers who receive benefits and those that don't. The new limits will mean families with three or more children will be hit, even in social housing properties outside London

 

Often it could be a combination of these factors – a family with two hildren, some disability and a moderately high rent in a not that posh area could be hit by the cap.

 

Of course a working household faced with any of these three extra costs could also get support – the unfairness for workers lies perhaps more in the steep rates at which some of this support tapers off with earnings. The current system deems 85% marginal tax rates acceptable at the bottom but 50% barely acceptable at the top of the income scale.

 

 

What counts towards the cap?

All the following benefits are counted, with those marked with a * also being  available to people in paid work:

 

Bereavement Allowance*, Carer’s Allowance, Child Benefit*, Child Tax Credit*, Employent and Support Allowance (and Incapacity Benefit/Severe Disablement Allowance), Guardian’s Allowance*, Incapacity Benefit, Income Support, Housing Benefit*, Jobseekers Allowance, Maternity Allowance, Widowed Parents Allowance*

 

 

How does the cap work?

 

In all cases the DWP should have written to you beforehand warning you in advance that you are likely to be affected by the cap and offering you support. Of course there may be some that they missed, or changes in circumstances that bring new households into Benefits Cap territory

 

The cap is operated by your local council: If your total income from the benefits above exceeds the Benefits Cap , then your Housing Benefit will be reduced until the total falls below the cap – or there is no more Housing Benefit to take away.

 

For those receiving Universal Credit rolls out, the reduction will not stop once any help with the rent has been cut off, but will continue cutting into the rest of benefits to cover basic living costs. It also means owner occuppiers could be caught for the first time

 

The blunt general message of the Benefits Cap is that people affected either need to plan to move to a cheaper area or move into work to escape the cap., unless they are exempt.

The work exemption currently means either doing enough hours - 16, 24 or 30 depending on circumstances to be eligible for Working Tax Credit or if coming under Universal Credit to be earning a minimum of £430 a month (or £99.30 a week) or more.

 

 

When’s it happening?

 

There were three phases to the introduction of the cap:

 

1.       The initial pilot  - from  15th April 2013 – Bromley, Croydon, Enfield and Haringey

 

2.       Tranche 1 - From 15th July 2013 – it goes national – hence all the recent press – but only to those council areas expecting less than 275 households to be affected

 

3.       Tranche 2 - From 13th August 2013 - depending on progress in the other areas -, then the remaining areas – mainly London Boroughs, other council areas in the South East  and the bigger cities – i.e all those with more than 275 households affected will start capping

 

 

The new lower limits take effect in all areas from the 7th November 2016. The impact is expected to increase the number of houshold affected from 20,000 to 88,000, with caps becoming more common in all areas, but especially in areas in the South East but just outside Greater London where the rents may be almost at London levels but the cap limits that much lower.

 

 

Exemptions to the cap

 

There are important exceptions to the cap though:

 

1.      In Work: It does not apply if you are entitled to Working Tax Credit or earning over £430 a calenda month on Universal Credit

 

2.      Recently in work : - a period of grace of 39 weeks if you have been in work for 52 weeks or more when you make a new claim for benefit

 

3.     Getting a "disability benefit" – if you or anyone else in the household – including children - get either Attendance Allowance, Disability Living Allowance (DLA)Personal Independence Payment (PIP) or  Industrial Injuries benefits. But there is no exemption for a carer living in their own place

 

4.      Sickness  – if you get Employment and Support Allowance (ESA), but only if you get the Support Component. This also applies to those receiving the equivalent LCWRA element within Universal Credit.

 

 

The cap and people affected by cancer

 

Many people with cancer  won’t be affected anyway, either because they are over working age or because their benefits income comes nowhere near the levels for the Benefits Cap

 

For those that do, many will come under one of the above exemptions:

 

·         For those with the most advanced cancers, special rules may mean that you quickly get both ESA (Support Component) and a disability benefit (such as PIP). Both would exempt you

 

·         Others may qualify for ESA Support Component/UC LCWRA element from week 14 of an ESA claim (or weeks 13 to 18 of a UC one), because you may bypass the standard Work Capability Assessment while you are awaiting, receiving or recovering from chemotherapy or radiotherapy.

 

·         If you have not long stopped working - you may still be receiving Working Tax Credit for the first 6 months of being sick or be covered by the 39 weeks “period of grace” if you had been in work for at least the previous year.  This might cover you while you wait for a PIP or ESA Support Component/UC LCWRA element to kick in

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          However, some people will be caught by the cap. For example:

 

 ·         If you are waiting for the 3 months before your Support Component kicks in or for a PIP decision to be made, if you weren’t in paid work recently


 

·         If your ESA has been awarded with the work related activity component rather than support component

 

·         you are a carer for someone with cancer but not in their household e.g. a friend or relative round the corner.

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I    In such situations, the Benefits Cap may apply, but you can ask the local authority to make up any shortfall in rent that results through a Discretionary Housing Payment within Housing Benefit or Universal Credit.

 

 

Early experiences with the Benefits Cap

 

Maggie’s Benefit Advisors in the pilot areas are finding that preparatory work in partnership with the four councils concerned is paying off. Their contacts mean that any issues can be resolved in a few days, but so far it seems:

 

·         most centre visitors are actually - or soon could be made – exempt, because of the benefits exemptions

 

·         councils implementing the cap have been willing to hold off applying it, when it is clear that entitlement to an exempting benefit just needs the paperwork to go through

 

·         when the cap has applied – e.g. for a carer – councils have been willing to look at a discretionary hardship payments of Housing Benefit to to cover the rent shortfall, resulting from the cap.  In the past this discretion was usually short term to give a breathing space to move, but for people affected by cancer it has usually been accepted that it may be unreasonable to move and long term support has been offered with a 12 months award and a willingness to look at a further award after that

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     The test will be whether all  authorities will follow the good practicee being set in the pathfinder areas,  how well someone will fare when they don’t have such excellent support  from an adviser and whether things change as the discretionary housing payment pot comes under pressure.

Th  The independent Institute of Fiscal Studies published a report on November 7th 2016 looking at the story so far and the likely effects of the changes, building on a previous report in 2014. Their latest report is available here

T

T    Their main findings were

         -  only 5% of households moved into work, 

  -      - a similar number moved to a cheaper home

  -      - some 14% managed to become exempt via a disability benefit

     But the majority simply took the hit,  with 40% getting help from a DHP, offsetting any savings from the cap, making the net financial saving to the Government "trivial" but not necessarily the harship to households enduring a mean loss of £76 a week.

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What should I do if I’m concerned ?

 

If you are concerned about the Benefits Cap then it will certainly be worth you getting in touch with an Advice agency or calling in at your local Maggie’s Centre, as they hopefully can find a way through if indeed you are affected. Please also feel free to post any queries or thoughts about the benefits cap here at the Online Centre or message me privately.

 

The Benefits Cap then won’t affect that many households but will have a big impact on those that it does– mainly by leaving you very short on the rent. If you are affected, please do not assume that you need to start packing though, as hopefully there will be a way through for people affected by cancer.

 

Even if you are not affected by the cap, hopefully this blog offers a little light on the heat  of the media/political fever and some food for thought. Next time, in a much shorter Part 2  I will take a look at the much less noticed,  but much wider reaching Benefits Uprating Cap

 

Best wishes,

 

Tom

 



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