As the cost of living rises in the UK and inflation food price rises to a 14-year high, the poorest households in the UK are still being subjected to a cap on benefits. This cap, introduced in 2013 by the coalition government, aimed to incentivise people to get into work but evidence from the Department for Work and Pensions suggested that employment levels were not impacted.
A recent briefing from the Child Poverty Action Group explores the benefit cap freeze and its impact on the poorest UK households.
What is the benefits cap?
The benefit cap is a limit on the total amount of benefits a household can receive if they earn less than £658 per month. It applies to most people between 16 and State Pension age in the UK. The benefit cap affects twelve benefit types including Universal Credit, Child Tax Credit, Jobseeker’s Allowance and Maternity Allowance. The cap does not apply to certain people if they or their partner get Working Tax Credit, have limited capacity to work and other exclusions.
The benefits cap was introduced in 2013 at £500 per week for couples or single parents and £350 per week for single people with no children. In July 2015 it was announced that from Autumn 2016 the benefits cap would be lowered to £384.62 per week outside Greater London and to £442.31 per week inside Greater London.
Since the reduction in the benefits cap was introduced 6 years ago, the cap has been frozen. Despite rising interest costs following the cost of living crisis across the UK, the government has not included increasing the benefit cap as a response.
Removing the cap would give the poorest households in the UK an additional £65 per week, costing the UK government £500 million, only 0.2% of total spending on social security, estimates the CPAG.
What is the impact of freezing the benefit cap?
There is already a large gap between the benefit cap in line with inflation and the benefit cap now, and with the inflation rate estimated to reach 18% in early 2023 according to leading bank Citi, the gap will be even more pronounced.
The CPAG has found that if the cap had been increased in line with inflation, then 94% of capped households would not have been subjected to the cap. If the government do not increase or remove the benefits cap then 120,000 households (that includes 300,000 children) will not receive any extra money from annual benefit rises, despite the exponential cost of living.
In real terms, this is likely to significantly impact food insecurity levels across the UK. Food insecurity is a lack of the financial resources needed to ensure reliable access to food to meet dietary, nutritional, and social needs.
Already, we have seen the cost of living impact food security in the UK. In May of this year, the Food Foundation saw a 57% rise in the number of households cutting back on food or missing meals in just three months. The Office for Budget responsibility predicts “the biggest fall in living standards in any financial year” as food prices and energy prices rise, whilst benefits and wages stay stagnant.
For the poorest UK households to survive the cost of living crisis, the benefits cap must be increased to at least match inflation, if not removed, and benefit levels need to rise to reflect the current financial climate.