The benefit cap has very little overall effect

Over 25,000 people who had their benefits capped moved into work, reduced their Housing Benefit claim or no longer claim Housing Benefit

More from the Department of meaningless statistics.  A press release from the DWP tells us that “thousands of people move into work or off Housing Benefit”, and just to let us know what that means, the figure on the right is now wearing a tie.

The presentation somewhat exaggerates the effect of the cap.  The nineteen-page statistical breakdown is here.

  • Figures are given cumulatively from April 2013 to May 2015.
  • 62,600 households have had their benefits capped in two years; only 22,500 of those are current.  This should be set against the government’s initial estimate of 80,000 in 2013.
  • The only people for whom we actually know about work outcomes are those who have moved on to Working Tax Credits.  There are 16,300 of them.
  • 4,500 people saw their benefit income fall back below the cap anyway.
  • 49% of those who are capped are on Income Support.

There is no attempt to assess what difference the cap has actually made.  As many claimants move off benefits regardless, the key question is whether they have moved off more rapidly than would otherwise have been the case.  Without that information, there is no reason to believe Iain Duncan Smith’s assertion that “the cap is working”.    Having said that, there doesn’t seem much point in trying to analyse in detail the disincentive effects of a policy that touches so few claimants.  Benefits that are ‘manifestly inadequate’ – the judgment of the Council of Europe – present very little prospect of offering a substantial income.

This is my 600th entry on this blog.  The transfer of addresses for the website and the blog was massively time consuming but is now complete and I hope that no-one will have suffered any disruption as a result.   If there are any problems I should know about, please let me know via the comments and I’ll try to get them fixed. 

The Conservatives fire more warning shots in the war against benefits

The announcement that the Conservatives want to lower the “benefit cap” to £23,000 a year is not new – they were trailing it as a policy last September. The most notable thing about the policy is that, although the numbers of people it will affect are very small,  it’s being touted as a leading issue for the forthcoming election.  By the government’s figures, this is a very marginal issue.  It’s a proposal to save £135m a year from a budget of some £93bn.  That saving isn’t certain – we know that estimates of the initial impact of the benefit cap were wildly exaggerated and had repeatedly to be revised downward, largely because people in these circumstances tend to move off benefits fairly rapidly anyway.

The very small numbers of people who are likely to be affected are people who have particularly high rents, and if they have high rents it’s generally because (a) they live in expensive areas like London and (b) they took on the rents when they had higher incomes.  There’s never been much support for the view that some better-off people might also need some income security in circumstances such as divorce or prolonged illness, but we ought to understand that that is the principle that is  being criticised when the benefit cap is ratcheted downwards.  The other main thing that the policy does is to keep in the headlines an inflated sense of the level of  protection that people get from social security benefits.  The UK’s support for people who are unemployed is one of the meanest provisions in the developed world.

The other side of the proposal is that the Conservatives are proposing to create 3 million apprenticeships with the money by 2020.  The Telegraph reports:  “the first priority of a majority Conservative government will be a further tightening of the welfare cap to £23,000, with the proceeds devoted to the creation of three million apprenticeships. ”  £135m a year for a fifth of 3 million doesn’t yield a massive amount for each apprenticeship:  it comes to £225 per apprentice.   Probably more important is the proposed saving by abolishing housing benefits for 18-21 year-olds, but if that comes up to the £300m that the Conservatives are talking about, it will still offer only about £500 per apprentice.  The idea that 3 million places can be created with such a small investment looks like fantasy budgeting.

Benefits cap: more dodgy statistics

On the Today programme this morning, newly appointed minister Mike Penning fulminated against a careful and thorough report by the Chartered Institute of Housing – and did so by reiterating claims that the benefits cap has encouraged 16,500 people into work.  There’s a summary on the BBC website.  The same claims, previously made by Iain Duncan Smith, have been directly condemned by the UK Statistics Authority, because they are based on figures that have not been published or subject to official scrutiny.

It’s very unlikely that they’re true, for two reasons.  The first is that it’s a normal part of social security that people who have become unemployed return to work in a short time.  The numbers cited in the CIH study as returning to work (10%) seem if anything to be lower than might be expected, but that may reflect the selection of particular groups (homeless people and single parents) for penalties.  The second is that the estimates of people affected by the benefit cap have been consistently exaggerated – first it was going to be 80,000, then 55,000, then 40,000, and even that may prove too high.  This may be a popular policy, but it’s aimed at a rare and unusual target group who when they exist do so in vanishingly small numbers.

Additional note, 9th December:  40,000 is too high.  The latest figure on the cap is that 28,500 have been affected.

The problem behind the benefit cap

Much of the argument about the benefits cap is based on an exaggerated emphasis on a very small number of people, intended to give people the impression that the system is far more generous than it really is; but there are some people affected (I met someone who was being capped last month). Iain Duncan Smith defended the cap on the Today programme this morning. Part of his defence was the claim that people on benefit were receiving support to pay for housing that people in work could not possibly afford. That has to be wrong. Housing Benefit is payable to people in work, at a slightly superior rate to people not in work – it is more generous partly because of earnings disregards, and partly because people in work don’t suffer the same penalties, like the bedroom tax. The taper – the rate at which the benefit is withdrawn – is 65%. This is the same figure as the taper being introduced for Universal Credit.

There is a more fundamental problem in the design of Housing Benefit; it is that the benefit depends on the level of the rent, and rents can be very high. If we accept that government is going to meet a large part of the cost that independent and private providers charge, then over time, those charges will come to reflect the benefits available to pay them. This is the trouble with Housing Benefit, and the same problem can be seen with some other benefits, including child care costs from tax credits, legal aid and residential care fees. In the short term, the way to deal with the issues is to cap the costs, rather than the benefits. In the longer term, however, the issues will not be resolved without direct provision of essential services.

More about the benefit cap

The DWP has released a breakdown by area explaining who it has written to about the benefit cap.  (I had put in a freedom of information request for this, but this is a general release, made before I received a reply.)  There have been nearly 89,000 letters, of which nearly half were to people living in London.  Half the total (just over 45,000) rent privately.   13,000 have no children.   This may seem to suggest a much higher figure than the previous ones – 67,000, 56,000 and 40,000 – but what it doesn’t tell us is how many of these people were in any case in temporary circumstances which have changed.   Two-thirds of jobseekers are out of work for less than six months.

The benefits cap: keeping the elephants away

There’s an old joke.  A man is painting white lines on the pavement, and when he’s asked why he says it’s to keep the elephants away.   When he’s told there aren’t any elephants, he says, “so it’s working”.   The benefits cap was introduced to stop claimants receiving more than the average wage.  I am sure there must somewhere be claimants who receive large sums of money, even if I’ve never come across them myself; in any system dealing with millions of people in diverse circumstances, almost any contingency, no matter how unusual, will happen somewhere.  There just won’t be many of them.  The DWP had estimated that there would be 67,000 people affected by the cap, from something between five and six million people on the benefits affected.  Now it is being reported that the actual figures will be ‘dramatically’ lower.  (Update, 12th April: the new estimate has been released, at 40,000.)  It seems that most people who have been on high benefits because of high commitments return to work.  What a surprise: nine out of ten unemployed people leave benefits within a year in normal circumstances.

Part of the purpose of benefits is to provide social protection, and  to smooth the incomes of people whose lives would otherwise be disrupted.  That’s why some people on benefits have cars and satellite dishes – they are not expected to sell them because they’ve hit a rocky patch.  Neither the current government, nor its predecessor, has seemed to understand the basic principle.


The cap

The government’s proposal to cap the total amount a household can receive in benefits seems to have caused some confusion, among opponents as well as proponents. The cap gives the impression that benefits are much more generous than they are; the DWP estimate is that this will affect 67,000 claims out of 5.5 million. Neither disability, nor having a large family, would be enough to explain why some people might have an income level over £26,000 a year. The main element in the calculation has to be coverage for housing costs, either in the form of rent or interest on mortgage repayments.

The government has said that no-one will be poor because of the cap. That must be true, because if poverty is defined in terms of median income, anyone receiving median earnings (which are higher) is going to be defined as not being poor. The misleading part of the statement rests in the assumption that benefits are only there to respond to poverty. One of the fundamental principles of social security is captured in the word “security”; it’s about social protection. People who become sick, disabled or divorced should not have to strip themselves of assets in order to claim benefits. People who live in expensive houses are not forced to move out of them – or have not been up to now.