The benefit cap may have made it through the Welfare Reform Bill committee but the fundamental problems with it are not going to go away so easily.
In a momentous week that has also seen the Localism Bill get Commons approval (more on that another time), Labour amendments to the controversial cap that would have written specific amendments into the legislation were defeated after the government described them as wrecking amendments. As welfare minister Chris Grayling put it: ‘The problem with the amendments is that the cap would apply to almost no one.’
The government’s approach seems to be to legislate now and worry about the details later in the regulations that will follow. The Lib Dems on the committee voted in favour of the cap in principle but, as Isabel Hardman reported yesterday, are demanding changes to the details in the secondary legislation to follow.
They may not be the only ones. A Financial Times report over the weekend suggested that the cap is facing opposition not just from deputy prime minister Nick Clegg but also from the main man piloting it through parliament, welfare and pensions secretary Iain Duncan Smith. Combine that with a strongly worded warning about its introduction from the think-tank he founded, the Centre for Social Justice, and it seems clear that concern goes far deeper than the usual suspects.
According to the FT, it’s chancellor George Osborne who’s pushing the policy that he announced at the Tory conference last year. As one of his aides puts it, ‘it is extremely popular with the public and we are confident about it’ - an argument repeated several times by Conservative members of the committee on Wednesday.
A succession of Labour amendments in Bill committee debates on Tuesday morning and afternoon may have been voted down but they also revealed the scale of the problems that the cap could create.
As Labour’s Karen Buck put it: ‘As drafted, the cap is so flawed and so full of perverse incentives that it is really hard to see how it will operate at all - still less operate and save the money on which the proposals are predicated.’
Lib Dem Jenny Willott supported the cap in principle but argued that ‘the cap as proposed will not work’.
Under the cap total household welfare payments for working age households will be limited to £500 a week for a couple and £350 a week for a single person. Under the current plan, there will be exemptions for households including someone entitled to working tax credit, disability living allowance or constant attendance allowance and war widows and some work incentive payments for lone parents and people leaving incapacity benefit will also not be included.
However, here are just some of the potential problems revealed in the debate:
- It will not save money overall. Although it says the primary purpose is to boost work incentives, the DWP says it will deliver cost savings of £270m in 2014/15 but Lib Dem MP Jenny Willott claimed that the DCLG estimates that it will increase homelessness by 20,000 people, costing £300m in emergency housing.
- It may not increase work incentives. Labour’s Karen Buck and Lib Dem Ian Swales argued that it will incentivise people to move from high-cost housing areas to lower-cost ones where there are fewer jobs.
- It contradicts the aims of the Universal Credit to make it easier into work or work more or less hours without suffering a big drop in income. ‘It creates cliff edges and makes a temporary period of unemployment a catastrophe,’ said Buck.
- Even if it does incentivise work, many of the families affected are people the state does not expect to work or who are too sick to work.
- It could penalise people in work who lose hours and cease to qualify for working tax credit and their exemption from the cap.
- It will encourage couples to split up. In the very opposite of a family-friendly policy, a couple’s income will be capped at £500 a week but if they split up into two single households they will each get £350 a week.
- It will penalise families with children. Willott said it would hit hard-working families who suddenly lost their job and could not pay their rent. Even two-child families in London face losing a third of their housing benefit. It will push more children into poverty just as the universal credit promises to lift them out of it. Lone parents moving into work will be worse off because child-care costs are not covered.
- It will have a disportionately damaging impact on social tenants and landlords. The impact assessment estimated 70% of the 50,000 families affected will be in social housing. As Buck put it, ‘they are affected not because their housing costs are dragging them into the cap but because they are larger families and their child tax credit and child benefit payments, in particular, are taking them above the cap for the cheapest housing in the country’. The inevitable rent arrears will threaten homelessness for tenants and damage the finances of landlords.
- It contradicts other housing policies like affordable rent since housing associations building homes at 80% market rents will find their existing client group will be unable to afford them.
That’s just a flavour of the issues that the DWP will have to deal with in framing the secondary legislation. Grayling hinted at movement on issues like temporary accomodation and denied that others would have the impact the opposition claimed. He stressed that ‘this is a framework clause that will start the process of filling in the gaps over the next few months’. But he must know there are a hell of a lot of gaps to be filled.
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Readers' comments (4)
Chris | 19/05/2011 11:07 am
'According to the FT, it's chancellor George Osborne who's pushing the policy that he announced at the Tory conference last year. As one of his aides puts it, 'it is extremely popular with the public and we are confident about it' - an argument repeated several times by Conservative members of the committee on Wednesday.'
They could say the same about hanging - yet it is recognised across parliament as the wrong thing to do - or is that to be the next punishment for the demonised sector?
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Joe Halewood | 19/05/2011 12:32 pm
I’ll restate the real problem - missed above - with the overall benefit cap – it makes DV refuges and homeless families units (HFU) unaffordable. A parent with 3 children gets £317 pw in benefits and reliefs according to unchallenged CIH and NHF figures. This leaves a maximum £183pw / £795pcm that can be paid in HB.
As many of the rent levels in refuges are (necessarily) higher than this it means those fleeing DV will not have their rent covered in full.
Refuge providers cannot afford to subsidise or reduce rent levels leading to selective admission policies. Those exempt from the cap such as those in receipt of disability benefits will be exempt but apart from war widows no other persons are.
So if you are suffering DV and on DLA you can get a place of safety in a refuge – if not on DLA you won’t be able to.
DV refuges suddenly become non-viable as a business model and can’t be sustained meaning their numbers will reduce sharply and place so many more women and children at risk. Add this to the existing risks of SP losing the ringfence and significant cuts in funding and many refuges will not be able to survive.
The overall benefit cap is one cut too many and will see refuges close and more women killed as a result of DV
HFUs will be in the same boat and access to them will be on the basis of whether the homeless family is in receipt of DLA or not.
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Gresley | 19/05/2011 8:25 pm
The real aims are not to save money, incentivise work or drive down rents. The real aim is to make being poor harder and nastier and even more entrenched. That's because that is what makes people like Tax-me-not Osbourne and other bullies tick and help maintain their relative position as unchallenged masters of all they survey. These people get a buzz out of seeing people struggle and out of kicking people when they are down.
All governments are driven to a lesser or greater degree by ideology. The ideology of this government is is essentially feudal in nature. The aim is a minimal state, only there to maintain the privileges,d property rights and safety of the wealthy and powerful elites. There is no place for any kind of structured welfare state or state sponsored interventions to improve the lot of those outside of the charmed circle. And there absolutely no intention of aiding upward social, economic or political mobility for the vast majority of people.
We need to stop arguing against these welfare (and other) policies on the grounds that:
They will cost more money. They won't because the money won't be there to cover the consequences.
They will increase ill health and lower living standards amongst the majority. Those putting forward these sort of policies simply couldn't care less if the 'little' people suffer a worsening life style. It is not their problem and the lower orders should simply stop whinging, pull their socks up and get back to work.
They will cause greater social unrest and crime. But no in the places where those behind these policies live, socialise and work. Gated communities, private security and in spite of this week's stony silence for Theresa May at the Police Federation conference, deep down the Police will protect the high and mighty. And compare to the rest of us, they will be kept sweet by the elite.
They will reduce econmic growth and opportunity. So what? The elite own enough land and assets both here and abroad that if Britain makes less cars or builds less homes it isn't going to affect them. They don't make their wealth from activity, work, entrepeneurship. They get it from owning and controlling assets and economic systems, like banks etc.
The legislation is to break the back of the welfare state. Consequences will be managed in that context - of bringing to an end the notion of welfare, of the common weal. We will suffer the consequences. The creators and supporters will not.
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Apoica | 19/05/2011 10:04 pm
At the risk of shattering the cosy consensus of the seemingly shocked:
"The impact assessment estimated 70% of the 50,000 families affected will be in social housing. As Buck put it, ‘they are affected not because their housing costs are dragging them into the cap but because they are larger families and their child tax credit and child benefit payments, in particular, are taking them above the cap"
So when it comes to these "large" families that are entirely dependent on State benefits to support the procreative choices of the (usually) single mother that produces them, at what point does the taxpayer get to say "enough is enough: we are not going to give you any more money to support an ever increasing brood that you patently cannot afford to support without relying on us for ever increasing handouts?"
All the evidence shows that the State makes a terrible surrogate parent and it's time that the perverse incentives to breed-for-council-flats-and-benefits-for-life were ended. In order to pull in £26,000 per year after tax (the level of max benefits cap for a couple) you would need to work in a job that pays at least £40,000. Far higher than the national average salary. What incentives are there to work at all without a cap on benefits? As the Oik himself said, the purpose of the cap is to change behaviour, not to save money, and for this reason the cap has a huge amount of public support across the political spectrum as the opinion polls clearly show. Personally I'm sick and tired of seeing the mushrooming of a feckless, poorly educated underclass aristocracy with an entitlement complex who haven't worked in generations get "priority" housing in expensive London areas without doing anything more than laying on their back for it and getting paid by the State to continue doing same ad infinitum.
The public are buying into this. When Attlee introduced the National Assistance Act in '48 he did not envisage it mushrooming into the single parent multi-generational welfare dependency culture that NuLab left us with today. Something had to give. And it just did.
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