A new report from the Child Poverty Action Group says thousands of families will face benefits cuts in the new year due to the benefits cap.
An estimated 35,000 households on universal credit (UC) – mostly families (77%) – will have their benefits capped in the New Year because they lost jobs or earnings to Covid-19 in March and their grace period has now expired, according to analysis by the Child Poverty Action Group (CPAG).
The benefit cap limits the total amount of benefits that non-working and low-earning households can have. UC claimants are exempt from the cap if they earn at least £604 a month (equivalent to working 16 hours a week at the ‘national living wage’) or if they receive some disability benefits. There is a nine-month grace period before the cap kicks in if in the 12 months before their earnings dropped below the threshold for UC claimants have earned over £604 a month.
The CPAG says the financial impact of the cap is large with households with children likely to lose on average £62 per week as a result of being capped. It says those affected in March will be the first wave of many, as households who lost earnings later in 2020 and were unable to find re-employment will see their grace period expire some time in 2021. It estimates that in the first few months of next year, an estimated further 41,000 households will be hit by the benefit cap when their grace period expires. It adds that, in a shrinking jobs market, few of the UC claimants in the last months will have been able to find a replacement job or increased their working hours.
The CPAG adds that the number of households affected by the cap has more than doubled to 170,000 since the start of the pandemic with 85 per cent of households currently capped being families, of which include a child aged five or younger.
It is calling on the Government to suspend the benefit cap immediately to prevent more families from falling into hardship and says scrapping the cap would lift 250,000 children out of deep or very deep poverty at a cost of £500 million which it says is less than the cost of the ‘Eat Out to Help Out’ scheme.
Chief Executive of the charity Alison Garnham said: “The benefit cap has always been irrational because it takes no account of the number of children in a household so families, especially those in areas where housing costs are high, are disproportionately affected by it. The cap is increasing child poverty and in the context of a coronavirus recession is transparently nonsensical and wrong. At a minimum it should be suspended immediately to prevent the most vulnerable families from being pulled further into poverty.”