This autumn the benefit cap will be cut, squeezing low-income families even further and pushing more people into poverty. The Welfare Reform & Work Act 2016 lowers the cap to £23,000 per annum for families (or £15,410 for single claimants) in London and £20,000 for families (or £13,400 for single claimants) outside of London. There are currently 3.9 million children living in poverty. Projections from the Institute for Fiscal Studies suggests that child poverty could rise by 50 per cent by 2020. Tightening the cap and taking away more support from low-income households will have a devastating effect on families and children.
The benefit cap uncovered
Whereas the existing benefit cap was justified by the Government as being linked to the average earnings, the 2016 Act removes this link and sets the cap according to arbitrary figures in primary legislation. In addition to reducing the cap to below the average earnings, the Act grants the Secretary of State the power to lower, or increase, the cap at any time depending on the national economic situation and ‘other relevant factors’.
The Department for Work and Pensions (DWP) claims that the benefit cap improves work incentives and promotes fairness between those on out of work benefits and taxpayers. This is a dubious assertion. The benefit cap affects in-work families, as well as those out of work. Two thirds of children in income poverty live in a household where at least one parent works.
This is not to say that in-work families are more deserving than out-of-work families: all should be entitled to a reasonable level of support based on needs. Capped benefits include child benefit, child tax credit and housing benefit and the lower cap will see families struggling to maintain housing security and being able to provide basic care and nutrition for their children. On the face of it, not very fair at all.
The benefit cap disproportionately affects women with children. This was challenged in SG and Others, where the Supreme Court agreed that the cap discriminates against women under Article 14 of the European Convention on Human Rights. Three out of five judges held that the benefit cap did not unlawfully discriminate against women as the discrimination was justified. The justification largely based on the fact the cap was in line with average earnings. In Lord Kerr’s dissenting speech he said “it cannot possibly be in the best interests of children affected by the cap to deprive them of the means to provide them with adequate food, clothing, warmth and housing, the basic necessities of life.”
The Government has failed to consider the comments made in SG with regards to the best interests of the child and impact of the benefit cap. Instead households face a lower cap estimated to affect a further 90,000 families in the UK and if the cap wasn’t enough bad news, there is a freeze on social security benefits and tax credits for the next four years and a very unpleasant and draconian “two child rule” that will come into force early next year.
How we can help
The DWP has started sending out letters with information on the reduced benefit cap however, it has not yet published a schedule for the roll out. The cap is likely to be implemented in a staged process from late autumn.
We are looking for test cases to challenge the benefit cap. If you are an adviser and have clients currently affected by the cap, we would like to hear from you. You can contact us by completing the referral form here. Alternatively you can email us directly at Testcases@cpag.org.uk.