The Welfare Reform Act gives the Government the power to cap the total benefits to which a single person or couple is entitled.
How is the cap calculated?
The cap will be set at the average (median) net earnings for a working household, currently projected to be £500 per week (£26k per annum) for couples and lone parents, and £350 per week for single people without children.
Which benefits are included?
The following benefits are included in the cap:
- Bereavement Allowance
- Carer’s Allowance
- Child Benefit
- Child Tax Credit
- Employment and Support Allowance (contribution-based and income-related) except where the Support Component has been awarded
- Guardian’s Allowance
- Housing Benefit
- Incapacity Benefit
- Income Support
- Jobseeker’s Allowance (contribution-based and income-based)
- Maternity Allowance
- Severe Disablement Allowance
- Universal Credit
- Widowed Parent’s Allowance
- Widow’s Benefit
The cap will not include one-off payments, non-cash benefits and passported benefits, such as free school meals, nor will it include Council Tax Benefit. The childcare element of Universal Credit will also be excluded.
Who will be affected?
The cap is targeted at out-of-work-families. The DWP estimates that about 67,000 households will be affected by the measure in 2013/14 rising to 75,000 in 2014/15. In 2013/14 this means that 80,000 adults and 190,000 children will be affected.
Households will be exempt from the cap if a member of the household is claiming Disability Living Allowance (DLA) or the Personal Independence Payment (PIP), Attendance Allowance, Constant Attendance Allowance, Industrial Injuries Benefit, Working Tax Credit or the support component of Employment Support Allowance. However, this exemption does not apply if it is a non-dependent member of the household who is in receipt of DLA or Attendance Allowance, for example if parents are caring for an adult disabled child. War widows and widowers will also be exempt.
It will fall disproportionately on households living in more expensive areas, and therefore eligible for higher rates of housing benefit. It has been characterised as a cap on large families, however families with just two children will be subject to the cap in all of inner London and many parts of outer London including Newham, Haringey and Hounslow because of higher housing costs in these areas.
How much will people lose?
Pensions estimates that affected households will lose an average of £93 a week (mean) or £63 a week (median). 20% of those affected are expected to lose more than £150 a week.
Federation research shows that if the cap was introduced today, a couple with two children living in a three-bedroom home in London on 80% market rent could be left with just £237 per week once they have paid their rent
When will the benefit cap be introduced?
The benefit cap will be introduced from 15 April 2013 in four London boroughs Bromley, Croydon, Enfield and Haringey. National roll out will begin on 15 July and will be completely implemented by September..
How many people will see their benefit cut?
The Department for Work and pensions estimates that about 56,000 households will be affected by the measure in 2013/14 rising to 58,000 in 2014/15.
It is expected that 46% of those affected will be in the social rented sector and 54% in the private rented sector.
Will the cap be calculated weekly or monthly?
The cap will be calculated weekly until a claimant migrates to Universal Credit, between October 2013 and 2017, at which point the cap will be calculated monthly, as with their monthly Universal Credit payment.
How much is available through Discretionary Housing Payments for those affected by the benefit cap?
There is an additional £75m of Discretionary Housing Payments available in 2013-14 and £45m in 2014-15.
Want to read the regulations?
Find out more
Read our briefings on the Welfare Reform Act.