Is this going to be like the housing benefit cap?

Think back a few years to when housing benefit was capped. At first there was outrage as £400? £400! You can’t get a rabbit hutch for that! rang out across the land.

Then it was gently explained that this was £400 a week, not £400 a month. At which point the outrage rang out across the land. Who the fuck has been able to claim £1,600 a month for rent?!Burn ’em!?!

And so we come to the benefits cap:

Nearly a quarter of a million children from poor families will be hit by the extended household benefit cap due to be introduced this autumn, according to the government’s latest analysis of the impact of the policy.

The new cap will take an average of £60 a week out of the incomes of affected households, almost certainly pushing them deeper into poverty. About 61% of those affected will be female lone parents.

Anti-poverty campaigners said the cap would damage the life chances of hundreds of thousands of children, and force already poor families to drastically cut back on the amount they spend on food, fuel and clothing.

The new cap restricts the total amount an individual household can receive in benefits to £23,000 a year in London (£442 a week) and £20,000 in the rest of the UK (£385 a week). It replaces the existing cap level of £26,000.

Now obviously £20,000 a year isn’t great riches by British standards. It’s also in the top 2% of all global incomes. And there’re plenty of people out there who make less than £20k from a full time job.

So which way will this go? We’re obviously going to get, from The Guardian and points left, wails and articles about how awful this is. about people struggling on this sum. But what is going to be the general response? Yes, that’s a shameful amount? Or, come on, that’s a fair whack from the rest of us get on with it yourselves for more?

At some number the first would predominate. £5k for a family say. At £40 k for a family the second would. But what’s going to be interesting is where the dividing line is. My suspicion, and it is only a suspicion, is that £20k will still allow the “that’s a fair whack” brigade to predominate.

Largely because it is, it’s not far off median household income for the country.

45 thoughts on “Is this going to be like the housing benefit cap?”

  1. It’s interesting that the benefit cap is back in the news because earlier in the week I saw a headline referring to the SCANDAL of evil PRIVATE landlords obtaining huge taxpayer subsidies via the housing benefit system.

    The Left want it both ways, as usual. Palatial accomodation for their favourite people, but ultimately owned by nobody in particular.

  2. And there’re plenty of people out there who make less than £20k from a full time job.

    Particularly after tax. That’s higher than the average take-home pay, isn’t it?

  3. The Inimitable Steve

    The new cap will take an average of £60 a week out of the incomes of affected households, almost certainly pushing them deeper into poverty. About 61% of those affected will be female lone parents.

    Should’ve thought about that before you dropped your knickers, love.

  4. @Blue Eyes

    “It’s interesting that the benefit cap is back in the news because earlier in the week I saw a headline referring to the SCANDAL of evil PRIVATE landlords obtaining huge taxpayer subsidies via the housing benefit system.”

    See also Housing Associations. The HB cap was particularly excoriated by associations who were based in metropolitan areas where rents exceed £400 pw as they’d have to eithe drop their rents or chase the tenants direct for the extra.

    One of the reasons why Universal Credit is so hated is that all benefits will go direct to the claimant in cash, who will then pay the association for rent, LA for care and so on.

    This is as opposed to the current situation, where the benefits are paid directly to the service provider, who, in the case of housing associations, also employ teams of benefit advisors to ‘make sure you get everything you are entitled to’.

    Neat, eh?

  5. @TIS

    “Should’ve thought about that before you dropped your knickers, love.”

    Pointing out the way someone is responsible for the situation they find themselves in is racist, or something.

    Report for reeducation, citizen

  6. The new cap will take an average of £60 a week out of the incomes of affected households, almost certainly pushing them deeper into poverty. About 61% of those affected will be female lone parents.

    If poverty is 60% of the median income (right??) then how can reducing benefits to a maximum of approx 120% of the median income (after tax) put anyone below the poverty line? Surely those already below the poverty line won’t be affected, by their own definition.

  7. It’s median income adjusted for household size. Thus large families can indeed be put below it by the cap. But that’s a function of being a large family.

  8. It is worth emphasising that this is purely a cap on *benefits*, not total income – so if the “victim” gets a job delivering junk mail or stacking shelves at Tesco or Sainsbury at £7/hr for ten hours a week, she gets £26k (£29k in London)

  9. Ah makes sense. Of course now I’m pondering how big must a household be for an after tax income of 20k to be 60% of median income? That would be 33k aftr tax.

  10. Justin, it’s more complicated because of tax credits.

    A family with two children and an income of £20,000 will get £5,325 a year in tax credits, but pay £3,235 in tax and NI, so leaving them with a take-home pay of just over £22,000.

    http://www.tax.service.gov.uk/tax-credits-calculator

    And that’s if all the money is earned by one of the couple. If it’s spread across the two, the tax credits stay the same but the income tax and NI drop, because you can use two personal allowances and NI thresholds. If it’s split fairly evenly there could be no income tax and just £465 of NI between the two, so gross salary of £10,000 each could give after-tax income of around £24,850.

  11. A family with two children will only need gross income of around £15,000 to get £20,000 take-home pay, after tax & NI going out and tax credits coming in.

    A bit more than £15,000 if there’s only one earner, a bit less if that’s spread across two.

  12. The cap only affects what the DWP would regard as able-bodied workless households, so I don’t think a lot of sympathy is going to come their way.
    If disability related benefits are in payment, or if you are working 16+ hrs a week if single ( 24+ hrs a week if a couple ) then you are not affected. Pensioners are also excluded. And if you lose a job through no fault of your own, you’re excluded for the next 39 weeks.

    More interesting to me is the public reaction to the 2 child rule from 01.04.17, which means anyone on benefits with 2+ children already who decided to rut without the rubber tonight will not be able to feed and clothe their child when it arrives.

  13. Things aren’t getting desperate till someone on zerohedge suggests it’s time to short cigarette manufacturers

  14. “We’re obviously going to get, from The Guardian and points left, wails and articles about how awful this is. about people struggling on this sum.”

    Suspect they’ll come up with some examples that don’t prove the point they are trying to make. In other words, clickbait.

  15. “The new cap restricts the total amount an individual household can receive in benefits to £23,000 a year”

    It’s not true anyway. Child benefit isn’t included in the cap, nor are disability benefits, nor is housing benefit if on disability benefits.

  16. Given that London is overcrowded and expensive while some parts of the country can’t give away houses, shouldn’t the London cap be equal to, or even lower than, the rest of the country in order to reduce London overcrowding?

  17. “They” define poverty as 60% of median household income, so why not fix the cap at 60% of median household income. Bingo, poverty eliminated overnight.

    So that’s £16,000 or so. More than I’ve ever been on.

  18. It is worth emphasising that this is purely a cap on *benefits*, not total income – so if the “victim” gets a job delivering junk mail or stacking shelves at Tesco or Sainsbury at £7/hr for ten hours a week, she gets £26k (£29k in London)

    Have you taken into account the benefits withdrawal rates? JSA (wot your hypothetical is likely on) is withdrawn pound for earned pound.

  19. @Alex, effectively that is what the tiny extra London amount is… but disguised so that Guardian readers (who are notoriously inumerate) won’t notice.

  20. The Inimitable Steve

    John – I know. I self-identify as a bastard though, and it’s bastardophobic to deny me my questionable-parentage-inspired identity.

  21. Dave said:
    “It’s not true anyway. Child benefit isn’t included in the cap, nor are disability benefits, nor is housing benefit if on disability benefits.”

    Great, so we’ll have even more dodgy disability claims?

  22. @ Ukliberty
    Have YOU taken into account the disregard?
    Secondly, that affects only JSA which is a smallish minority of the £20/23k benefit cap (< £4k). Child tax credit and housing benefit are much bigger.
    Not *my* hypothetical, not even Tim's, but that of the "anti-poverty campaigner" who thinks an out-of-work family should be better off than one with two working adults or one with a Dad working full-time and a Mum with small kids working unpaid full-time to look after them. No-one is getting £20k pa from JSA.

  23. All I’m saying is that it seemed you simply added the earned and unearned incomes. Either you did or you didn’t. If you did that’s incorrect. If you didn’t good for you.

  24. @jgh

    “So that’s £16,000 or so. More than I’ve ever been on.”

    Cool! What instrument do you play?

  25. @ ukliberty
    Since the cap doesn’t apply to anyone who does enough work to be eligible for working tax credits …
    Most “victims” are not eligible for JSA but for the few that are replacing JSA with earned income releases the “victim” from the “cap” as well as increasing income.
    I added earned income to benefits because I assumed that the individual wasn’t eligible for JSA as not looking for work: in the large majority of cases that is correct – in the small minority I should have put in two paragraphs to explain that only part of the money would come through.

  26. I’m somewhat confused, I thought these families earning £26,000 a year from benefits were atypical, a tiny number picked by the Daily Mail for a headline.

    If it really will affect “hundreds of thousands” of children, then it does imply that at least 70-80,000 families get this sort of money ?

    I would question the “Now obviously £20,000 a year isn’t great riches by British standards”. It’s after tax. 48 weeks a year 5 days a week 8 hours a day national minimum wage is about £12,800 pounds *before* tax.

    I’d be also interested to know if this is cash benefits, does it include the free school meals, dentistry etc etc etc etc

  27. @JuliaM I love the Guardian’s examples.

    One of the recent ones was a family who were doing some sort of charity campaign thing to raise money to pay their rent because of the evil Tories (or some such nonsense).

    Unfortunately for the male half he had an unusual name. About five minutes “research” (typing it into Facebook) showed at least five different holidays in the last 18 months (the most recent being to watch the Rugby World Cup), at least two of which were foreign holidays in different places (and weren’t cheap either).

    I pointed this out to him on the internet-scrounge page they were using, I got a sort of waffly non-reply which didn’t address the multiple holidays.

  28. And then there was the evicted Colchester family, whose daughters Facebook page, “Teddy loves to Travel” was and is informative for a family supposedly desperately poor. Several people pointed out in the terrible photographs of the family forced to leave that she had a Macbook under one arm and a Digital SLR Camera under the other.

  29. Paul

    Obviously this is just cash handed to the family, it doesnt include free healthcare, schooling etc.

    The big problem with this is that I kind of see the point – if you have lots of kids, 26K is very little. The issue that the anti-poverty wankers do not seem to understand is that if you subsidise something, you get more of it. And yes, we get more poor people if you give lots of subsidies. Which is what we were doing. In present value terms encouraging the poor is a terrible idea.

  30. I added earned income to benefits because I assumed that the individual wasn’t eligible for JSA as not looking for work:

    Fair, but the person working up to 16 hours may be entitled to Income Support which is also withdrawn pound for pound.

  31. @ ukliberty
    Income support is for those ineligible for JSA because there are good reasons why they can’t take a full-time job. But the benefit cap doesn’t apply to those entitled to working tax credit so anyone adding a few hours (not even as much as ten for some people) would be freed of the cap *and* get more income plus benefits as working tax credits would kick in.

  32. Bloke in North Dorset

    So, some very clever people on here, from left and right, struggle to get their heads round the various elements of benefits and the benefits cap, yet we expect the, usually, poorly educated poor and, from my experience, not much better civil servants, to implement the various rules.

    And we wonder why the system is fucked.

  33. @ BiND
    Most of us are not employed full-time to deal with benefit payments and claimants. If I was working in DWP I should have all this at my fingertips within a few working days of the regulations being issued and well before they came into force.

    The complexity of the regulations is no excuse for the appalling (and I frequently suspect malicious) incompetence of a minority of DWP staff. Managing to lose three or four copies of a form in succession (one delivered to the local Jobcentre, one posted to the admin office, the third and fourth posted by recorded delivery so that they couldn’t deny receiving them) has nothing to do with the complexity of regulations.

  34. I’ve yet to see an example given by the usual suspects (BBC/Guardian etc) of a person/family that appears to have been genuinely hard done by the benefits system. Every time an article is done bemoaning the Evil Tory Cuts™ the people they detail as being affected are consistently poor poster children for the political point being made, and usually result in the reader thinking along the lines of ‘I don’t make that much and I work full time’ or ‘I can’t afford one of those’ or ‘Well if you behave like that its no surprise you’re potless’. Do the authors of these pieces not realise their examples are actually having precisely the opposite impact than that they are hoping for?

  35. Bloke in North Dorset said:
    “So, some very clever people on here, from left and right, struggle to get their heads round the various elements of benefits and the benefits cap, yet we expect the, usually, poorly educated poor and, from my experience, not much better civil servants, to implement the various rules.”

    Actually the way the system works, the poor aren’t expected to understand the system. Other than a fairly short list of things that recipients have to tell the benefits or tax credit people about, the Treasury expects them to be passive recipients of money, because if they started to understand it they might try to game it.

    (in fact a lot of claimants understand the system very well and do game it, but that’s not the intention of the system)

  36. Absolutely my favourite is this one http://www.bbc.co.uk/news/uk-16812185 remarkably it’s from the BBC and it appears to be presented as a serious example of poverty caused by the previous attempts at capping benefits.

    The mistake they made was to break everything down, it’s an actual week to week budget showing where the money is spent. Of people who I know to be “short of money” – almost all of them – this sort of “budgeting” is not atypical. It is remarkable how many of them have iPhones (and not old ones).

    The comments are most entertaining. I think what annoyed people was the “I see eight people here having to choose between eating or heating” quote.

    Most people point out that having expensive phones (the kids will moan if they don’t have them apparently), Sky Movies, 4 pints a week, 24 cans of lager (a week !), 200 cigarettes (and so on) could perhaps go before food or heat.

    It’s so unBBC I wonder,

  37. Paul,

    You BBC ref is bit old, being 2011. However, I’m amused by the statement “Raymond, a former educational software writer, has been jobless since 2001”.

    I’m a software person, so presume he lost his job after the millenium “bug” no longer needed people. However, s/w does pay well, as long as you keep yourself up-to-date. And is one of “skill shortages” of the UK. He should be labelled “intentionally jobless”.

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