More families facing benefits cap as cost of living rises

Analysis by the Child Poverty Action Group finds that thousands more families could find their benefits capped next year, with the cap having not been increased since 2013 and being lowered in 2016 despite escalating living costs.

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Around 35,000 more families could have their benefits capped next April, leaving them with a growing gulf between their income and rising costs, according to new analysis by the Child Poverty Action Group (CPAG) which says that many families can’t escape the cap because of childcare issues.

The CPAG says Government figures published today show 120,000 households were already subject to the benefit cap in February 2022, 86% (103,000) of them families with children.  Because their benefits are capped, these families saw no increase in their income when most benefits were increased by 3.1% in April when inflation hit 9% – leaving them with a real-terms income cut of £2,070 in London and £1,800 outside the capital, says the CPAG. They also didn’t receive the temporary £20 weekly increase in Universal Credit introduced at the start of the pandemic.

The cap limits the amount of benefit that low-earning or non-working households can receive to £23,000 per year in London and £20,000 outside the capital. It hasn’t been increased since it was introduced in 2013 and was lowered to its current level in 2016.  However, while the cap has remained frozen since November 2016, the cost of living has risen by 18% since then.  The Chancellor has committed to uprating benefits next April, but the CPAG says that, unless the cap is removed, the rise will take an estimated 35,000 additional families to the capping threshold overnight – so they will see little or no increase in their incomes to help them cope with higher costs. It calculates that, in total, 150,000 families will miss out on the rise because they will be capped next April.

The CPAG adds that the cap takes no account of localised high housing costs and doesn’t recognise that many families with children face higher living costs.  It estimates that, had it been uprated with inflation since 2016, benefit awards  would be £4,220 higher than they are now in London and £3,670 higher outside the capital. It says around half (49%) of this real-terms loss in value happened in the year from April 2021 – April 2022.

Moreover, the CPAG says that the Chancellor’s emergency £650 cost of living payment for all benefit claimants will only mitigate three quarters of the increases in energy bills.

The DWP statistics show that 67% of capped households (80,000) are single-parent families, 19% (23,000) are couple-parent families and that the estimated average monthly amount of universal credit lost due to the cap is £236 for households which contain children. However, some lose out on far more – 15% of capped households lose out on over £400 a month. Over half – 53% – of capped families with children have a child under 5 and 22% of capped families have a child under two. London families are particularly affected, with 41,000 London households being capped, compared to 79,000 households outside London.

The CPAG adds that many capped families are unable to escape the cap by taking a job or extending their working hours because they have very young children and cannot pay for childcare, with single parents being particularly affected.

Alison Garnham, Chief Executive of Child Poverty Action Group, said: “The cost of living crisis shows that the benefit cap is broken, and needs to go. It has always forced families to live on much less than they need, but as prices spiral the effects are brutal and 298,000 children are among its casualties.

“In his cost-of-living support package the Chancellor recognised that families subject to the cap face the same cost pressures as everybody else.  By the same logic, the cap must be removed to help the worst off families stay afloat. Next April’s uprating must be available to every family on benefits, as a bare minimum layer of protection against dramatically higher living costs. “

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