Does the cap fit? Researching the benefit cap’s effect on paid work
April 6, 2021
Official statistics released today show that the number of households subject to the benefit cap has increased again. 180,000 households were capped in November 2020, up from 170,000 in August 2020. The benefit cap is applied to low-earning and non-employed households, and limits the amount of support they can receive from our social security system. The cap does not apply to everyone who claims benefits – for example families who earn a certain amount of income through work are exempt. The pandemic has contributed considerably to the increase in capped households because there have been widespread job losses and reductions in earnings taking households below the earnings thresholds at which the benefit cap is applied. While in the spring Budget the chancellor extended the £20 universal credit uplift by six months, this is of no help to capped households and pushes some households into being capped. The continuation of the benefit cap during the pandemic is also problematic given that a key aim of the benefit cap is to incentivise people into paid work: this is almost impossible given the current lack of jobs. But there are concerns that the cap is problematic in normal times too.
A 2019 Work and Pensions Committee inquiry into the benefit cap found that the majority of those affected by the cap are not required to look for paid work in order to receive benefits. This is because they face considerable barriers to paid work such as having young children or serious health conditions. The Committee therefore recommended that the cap only be applied to those who the Department for Work and Pensions (DWP) expects to be actively seeking paid work. In its response to the inquiry, the government explained: "The Department firmly believes...that just because claimants may not be required to look for work under work conditionality rules does not mean that they should not be encouraged to work or to prepare for work." This suggests that the benefit cap is applied without enough thought given to the barriers claimants face in getting and keeping paid work. It also raises questions about the integration of different benefit policies within the social security system.
The benefit cap disproportionately affects households with dependent children, and particularly single parent families. In November, 150,000 capped households (84 per cent) contained children, and 110,000 of these were single parent families. The availability and cost of childcare remain key barriers which prevent households subject to the cap from entering paid work. The government has increased help with formal childcare costs, supporting up to 85 per cent of costs in universal credit. But parents have to pay the costs upfront and claim them back, which can make it very difficult, and at times impossible, for parents to afford childcare. Parents also face a lack of jobs that are compatible with caring responsibilities, and a mismatch between the hours they can get childcare and the hours they might have to work. This has been made worse by the changing labour market which demands flexible workers and more jobs with non-standard hours. Affording and coordinating childcare for multiple children is particularly difficult. This is problematic given that today's statistics show that in November 76,000 capped households contained at least three children (that’s 43 per cent of all capped households).
it is these barriers to paid work, which are outside of parents’ control, that make it difficult for parents to find paid work and increase their earnings, rather than any lack of motivation. Multiple studies, including research with lone parents, have shown that unemployment is often due to structural and personal barriers rather than individual problems with motivation or behaviour. Yet the assumption that claimants need to be motivated to find paid work, which underpins and is used to justify the implementation of the benefit cap, persists. Through conducting repeat interviews with families affected by the benefit cap, the Welfare Reform and Larger Families project will track changes in behaviour and employment – both intended and unintended.
It is crucial to get more insight into the impacts of this policy on poverty, and on how people are managing. Given that the benefit cap disproportionately affects households with dependent children, it is particularly important to explore the ways in which it impacts child poverty and families’ well-being. Research to date conducted by the Welfare Reform and Larger Families project has found that people at risk of being capped are more likely to experience poor mental health than those who have not been exposed to the cap. This is particularly the case for lone parents living in high-rent areas.
While we saw an increase in households affected by the benefit cap this time, the next statistics released in June are expected to show an even bigger jump. This is because the nine-month 'grace period' (awarded to those whose earnings were at a certain level for twelve months prior to losing a job or having a reduction in earnings) will have ended for many people who have claimed benefits since the start of the Covid-19 pandemic. The Welfare Reform and Larger Families project will explore whether this policy achieves its intended behavioural and employment outcomes. It will also investigate the effects of this policy on poverty and wellbeing. This will provide much-needed, timely policy evidence on the impacts of the benefit cap, which radically alters the relationship between social security provision and need.