“I have given you an explanation on your Universal Credit payment, unfortunately it is not for me to comment or discuss your question on how you are to survive”

This was the response my client Sarah* received when she asked her Universal Credit case manager how she, her partner and 2 children were supposed to live on £73 for the entire month. Sarah had been hit by the benefit cap, a policy which has been in place since April 2013 and according to Child Poverty Action Group is now having a devastating impact on up to 250 000 households.

Anna Ellis, Client Support Caseworker

What is the benefit cap?

The benefit cap limits the total amount a household can receive in social security benefits per year if they are out of work or earn less than £604 per month. Crucially, the support people receive for housing costs can also be capped, leaving claimants in high cost areas like London with very little to live on after rent is paid.

In London, the total amount a couple with children can receive is £23,000 per year or £1916 per month. To put this into context, the local housing allowance or ‘LHA’ rate for a three- bedroom property in outer London is £1,600 per month. A benefit capped family renting a property for £1600 per month would be left with just £316 from Universal Credit after paying their rent. That’s £72 a week. Inevitably, this policy is plunging people into poverty, leading them to choose between paying their rent or feeding their family. Child Poverty Action Group anticipate that the suspension of the benefit cap would lift 100,000 children out of deep poverty and 150,000 out of very deep poverty.

What is the logic behind the benefit cap?

When the benefit cap was introduced, ministers said it was to ensure that non-working households received no more money in benefits than the average earnings of a working household. It was also supposed to incentivise unemployed benefit claimants to move into work. Both these assumptions were flawed from the outset – low income working households have long been entitled to claim benefits to top up their earnings – the myth that unemployed people on benefits receive more money than working households has just never added up. The second premise, that the benefit cap incentivises people to move into work is also questionable and it’s easy to see why – if you cut off someone’s financial lifeline, leaving them without enough money to buy food, let alone the bus fare to a job interview, they are clearly not in the best position to find work. The Work and Pensions Select Committee found that only 4.7 per cent of claimants moved into work as a result of being capped. Most claimants face major barriers to employment such as health problems or caring responsibilities for young children. In the context of record levels of unemployment caused by the pandemic, it is even more perverse to justify the continuation of the cap.

What does the DWP say about the benefit cap?

When questioned about the impact the cap was having in light of the pandemic, Work & Pensions Secretary, Therese Coffey, said there were ‘no plans to change the benefit cap’ – she instead cited a number of limited safeguards the DWP offers to protect people from the cap. In reality these safeguards are insufficient and rudimentary.

It is true that those claiming certain disability or carers benefits are exempt from the cap.  However, we at Z2K know all too well the barriers many sick and disabled people face securing these benefits – often waiting months to challenge the DWP at Tribunal.

It is also true the there is a ‘grace period’ by which recently unemployed claimants are exempt for nine months if they have consistently earned at least £604 for each of the previous 12 months. But the grace period is a blunt tool and many claimants previously in work do not benefit from it. My client Sarah and her partner are self-employed and their income fluctuates month on month – for some months they earn over £604 and for other months they don’t. For this reason alone they have never got the nine month exemption.

The Secretary of State also suggests that ‘claimants can… approach their Local Authority for a Discretionary Housing Payment if they need additional support to meet rental costs”. But Discretionary Housing Payments or ‘DHPs’ are just that – discretionary. Merton, the local authority Sarah lives in puts the following caveat at the end of their DHP form:

‘Merton Benefits Service is allocated a strictly limited budget by central Government that we can spend on Discretionary Housing Payments. For this reason even if you are awarded a DHP, it may not be given for the full amount of the shortfall of your rent’

Inside Housing recently obtained DHP data from 200 councils across the UK – They found that 28.9% of all DHP applications submitted to these councils were rejected.

What’s the solution?

Z2K is calling for the immediate suspension of the benefit cap. We are not alone. CPAG says that this is needed ‘to prevent the most vulnerable families from being pulled further into poverty’. The Government’s independent,  Social Security Advisory Committee has also called for the cap to be suspended or made more generous during the pandemic. The institute for Fiscal Studies has said so too. Sadly the situation is now worse than ever, with a large new cohort of people now facing the benefit cap as their nine month ‘grace period’ ends.

For people like my client Sarah this policy is personal “It’s the most difficult thing I’ve had to deal with …We applied (for UC) because my partner lost his job and I’m self-employed and I wasn’t earning very much…we have quite high rent so we needed help because we were getting in arrears and we didn’t have enough to live on…The Benefit Cap has been really difficult…I was in tears because I couldn’t support my family”.

We believe no one should go through what Sarah went through.  It’s time to scrap the cap.

*The pseudonym Sarah has been used to protect our client’s identity

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