The benefit cap was announced in the 2010 Spending Review and was introduced in 2013. It placed a limit on the total amount of benefit that most out of work people between 16 and 64 can receive to £500 for a family or £350 for a single person without children.
The cap applies to benefits including child benefit, child tax credit, jobseekers allowance, employment and support allowance and housing benefit. If any member of a household receives working tax credit or certain other disability or sickness-related benefits, then the cap will not apply to that household.
The 2015 Summer Budget announced plans to reduce the benefit cap during the 2016/17 financial year. The cap will reduce to £23,000 for a family or single parent in Greater London (£20,000 elsewhere in the country) and £15,410 for single childless claimants (£13,400 elsewhere). Claimants already affected by the current cap of £26,000 per year will automatically have their payments capped at the new lower rate on 7 November 2016. Households brought under the cap for the first time will transition onto the cap over a twelve-week period beginning 7 November 2016.
The benefit cap has a particularly marked effect in London due to the capital’s high rents which lead to large housing benefit claims. The large number of London households capped (and the larger reductions they experience) is placing borough homelessness and housing options services under pressure.
London Councils’ work
London Councils supports a benefits system that makes work pay. That means a system that takes into account London’s higher costs.
London Councils has lobbied for London’s unique circumstances to be recognised in the design of the benefit cap and the support given to boroughs to implement it.
In January 2015, London Councils argued against the Government’s decision to cut ‘discretionary housing payments’ in London by 33% - a far greater percentage cut than any other region will experience. The submission highlighted the pronounced effect of the benefit cap in London in driving DHP expenditure.
Latest caseload figures
The Department for Work & Pensions publishes statistics on the number of households that have been capped at any point, along with the most recently recorded outcome for each capped household. The chart below shows how the number of capped households in London has changed over time.
The chart below is based on the latest set of figures which show the picture up to August 2015. It demonstrates the extent to which more Londoners have been capped than households in any other region.
The chart below shows how London households tend to see their benefit income reduced by greater amounts than households in other regions.