7 arguments against the benefits cap

This post is something of a re-tread for me: here I was back in January 2012 explaining why the benefits cap is unfair. That was quite a long, discursive post. The idea is that this will be a much more concise and easy to follow guide to why the benefits cap is a bad idea.

(If you need a quick reminder, the benefits cap is a policy to limit the total amount of money an unemployed household can receive from welfare benefits. It doesn’t apply to people who are in work and receiving top-up benefits, or to people who the Department for Work and Pensions have judged to be too ill or disabled to work. The cap is set at £26,000, which is the median average salary in the UK. It’s in the news because, from today, the cap is being rolled out across the UK.)

So, seven reasons why the benefits cap is a bad idea. There are others, but this seemed like enough to be going on with.

1 – It punishes children for the behaviour of adults.

Children are dependent on the benefits paid to their parent(s) for food, clothing, shelter, etc. Once the cap is in force, the resources a child has access to will be determined by a series of factors – the number of siblings they have, the cost of the property they live in, whether their parent(s) work – over which they have no control. The benefits cap is supposedly designed to encourage responsible behaviour by adults, but it is their children who will be punished.

2 – It all but forces unemployed families to split up.

The cap is the same, whatever the size of the household. This means that if two adults and two children live together as one household their maximum income from benefits is £26,000. But if they split up – becoming two households, each of one adult and one child – the same individuals can receive a combined maximum income from benefits of £52,000. For families who cannot reduce their expenses below £26,000, and who cannot find work, the only solution is to split up. This is bad for the families concerned, and bad for the taxpayer – where before these people required one property to live in, now they require two, with all the duplication of costs that involves.

3 – It punishes tenants for the behaviour of their landlords.

It is only housing costs that place unemployed households at risk of being capped – income from other benefits is far too small. But tenants have limited control over their housing costs. Those lucky enough to be tenants of responsible landlords – housing associations, or private landlords who seek only reasonable profits – will not be subject to the cap. Where rents are above this reasonable level, the solution is to take action that will directly limit the cost (increasing the housing supply, imposing statutory rent controls), not to punish tenants for their landlord’s decision to charge them too much.

4 – It will force unemployed people to ‘get on their bikes’ – but only to head in the wrong direction.

The cap will only apply in areas where rents are expensive. Since rents are on average more expensive in the relatively prosperous south-east of England than they are elsewhere, this means the cap is in effect a policy to force unemployed people living in the south-east – and especially London – to travel to areas further north which have cheaper rents, but also fewer employment opportunities. It’s basically Norman Tebbit’s ‘get on your bike’ policy, but backwards.

5 – It will ghettoise, and so entrench, worklessness and poverty.

By forcing unemployed households to seek the cheapest accommodation, it will further concentrate worklessness and poverty into the poorest areas. These areas tend to be blighted by crime, and by poor physical and social infrastructure (damp, poorly maintained properties that cause long-term health problems; few local jobs; poor public transport links to areas with more jobs; bad schools; etc.). Adults living in such areas find it harder to get work, and children raised in such areas will be presented with fewer opportunities, fewer examples of people going out to work and making a better life for themselves, and more examples of criminal behaviour. This is a recipe for entrenching poverty, and increasing the likelihood that it will become a multi-generational problem.

6 – It will cause huge disruption to the lives of the short-term unemployed.

Where a rental household is headed by a breadwinner who abruptly loses a well-paid job, the benefits cap will immediately force them to seek cheaper accommodation. This could lead to children having to change schools – potentially jeopardising their life chances, if the need to move coincides with a critical point in their school career – as well as families having to leave behind grandparents who may have been acting as unpaid childminders. This will all apply in cases where the breadwinner might have been unemployed for no more than a few weeks, if they had been allowed to focus their attention on seeking work instead of relocating their family at emergency speed.

7 – It’s a sledgehammer trying to do the job of a scalpel.

If the cap is designed to encourage the unemployed back to work, it needs to be responsive to individual circumstances. A personalised cap, crafted to fit precisely and so to make it immediately apparent to an unemployed person that they, personally, would be x amount better off in work, might have a chance of working – though only if there are jobs available, and the individual doesn’t face insurmountable barriers (such as lack of education and training, lack of experience, lack of references, lack of childcare, lack of transport) to getting those jobs. A one-size-fits-all cap, applied at the same level to every household across the country, regardless of size and financial circumstances, has very limited chance of working. It’s nothing but a crude money saving scheme, and it may not even succeed in that. If it drives enough families to split, if it plunges enough households into homelessness and expensive emergency accommodation, if it limits the ability of the next generation to escape the poverty of their parents, it may end up costing us all more, not less.

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One Response to 7 arguments against the benefits cap

  1. There’s also the point the means tested welfare benefits are measured according to need, and limiting the needs of a family with four children to the average earnings of a single person is arbitrary. In fact it’s downright vindictive. Working people are exempt from the benefit cap, so we’ve ended up in the ludicrous position whereby a working lone parent on average earnings with four children living in privately rented accommodation in parts of London can receive more in working tax credits and housing benefit than they earn. But if they lose their job, not only do they lose their earnings, but their benefit will reduce too.

    The reason the housing benefit bill is so large is due to our economy being predicated upon low wages and high housing costs. Until we tackle these issues we will never reduce the benefits bill, except by inducing misery.

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