Tens of thousands of Britain’s poorest families stand to miss out on a huge boost to their incomes next year in Rishi Sunak’s £15bn package to ease the cost of living crisis thanks to the benefits cap.
Benefits payments are set to soar by as much as 10 per cent from April, the chancellor has confirmed, but more than 120,000 households will lose out unless ministers raise the cap on how much they can receive from the state.
Experts warned that unless the government acts, more families, many of whom have children under five, will hit the ceiling on payments.
Carl Emmerson, the deputy director of the Institute for Fiscal Studies (IFS), said that if ministers planned to make benefits more generous, to keep up with spiralling inflation, “the benefit cap should almost certainly increase to reflect that”.
Alison Garnham, the chief executive of the charity Child Poverty Action Group, said she welcomed Mr Sunak’s announcement that those on the system would receive the one-off payment of £650 given to millions of households. “But for the longer term, as prices rise, these families will stay trapped by the cap in an impossible position,” she said.
Ministers did not raise the cap during the Covid pandemic, despite increasing one benefit, universal credit, by £20 a week. The result for many households was that much of the rise was clawed back almost immediately.
First introduced by George Osborne as part of his austerity measures, the benefit cap is a limit on the total amount most adults under pension age can receive.
It currently stands at £20,000 a year, or £13,400 for single adults with no children. A slightly higher limit of £23,000 a year, or £15,410, applies in greater London.
But a recent briefing note for MPs noted that although most benefits and tax credits included are linked to the rate of inflation, the cap itself has never been increased. Instead it has remained at the same amount since 2016.
Mr Emmerson said that given that ministers had reinvented the welfare system with the introduction of universal credit, which is designed to allow those on benefits to keep more of the money they earn, “I’m not sure what benefit cap is really needed at all”.
It effectively “says we are OK with people who have a few more children in cheap parts of the country and we are OK with people having a bit more expensive housing costs as long as they don’t happen to be children”, he added. “What we don’t like is people having lots of children in expensive parts of the country.”
A spokesman for Sadiq Khan, the mayor of London, warned that despite Thursday’s announcement it would still mean that tens of thousands of low-income Londoners would still have their money “needlessly suppressed”.
The Child Poverty Action Group warns that most of the families affected have a child under five. “It is their development and their futures that are now on the line,” Ms Garnham said, adding that abolishing the cap could lift around 50,000 children out of poverty in a single stroke.
The latest statistics, for November, show that more than 120,000 households are subject to the cap. That figure was a fall of more than 50,000 households on the previous quarter. The drop coincided with the withdrawal of the temporary £20-a-week uplift to universal credit, which ended at the start of October.
A Department for Work and Pensions spokesperson said: “We keep the cap under review and any revision would align with the timing of decisions on uprating benefits, with changes taking effect the following April.”