The benefit cap didn't cause 30,000 to get back into work

Published: 6th Jul 2015

"Well you know when we introduced the benefit cap actually 30,000 people at least went into work because it's a cap that applies to people who are out of work."—George Osborne speaking on the Andrew Marr Show, 5 July 2015

It's not correct to say that 30,000 people have moved into work after having their benefits capped.

Of 36,000 households which have moved out of the cap, about 14,000 did so because they had started claiming a working tax credit. The remainder did so for a variety of reasons. For instance 5,000 households were exempted from the cap because they started to receive a different type of benefit, such as disability living allowance.

How the cap works

The benefit cap is a limit on the amount of benefits a working age household can receive. The cap is set at £500 a week for couples or people with children living with them (equivalent to £26,000 a year), and at £350 a week for single people without children living with them (£18,200 a year). It applies to income from benefits such as child benefit, jobseeker's allowance and housing benefit.

It works through reducing housing benefit or universal credit, so households not claiming those aren't capped.

Similarly, people who find work (or are already working) and claim working tax credit aren't capped. Neither are those on disability benefits.

Moving out of the cap—the numbers

59,000 households have seen their benefits capped between April 2013 (when the cap was introduced) and February 2015. 36,000 of these households have moved out of the cap.

14,000 of these moved off the cap because they started claiming working tax credit. That's 40% of those who are no longer capped. This doesn't necessarily tell us that exactly 14,000 households had someone move into work. Some might have moved into work but not received tax credits, either because they don't work enough hours or because they don't put in a claim. Or some people might already have been in work but only recently started claiming the tax credits they were entitled to.

5,000 had started to claim a benefit which exempted them from the cap—exempted benefits are disability living allowance, industrial injuries disablement benefit, some types of employment and support allowance, and the personal independence payment.

8,000 were no longer capped because they either no longer claim housing benefit, or their housing benefit was reduced. Another 4,000 households saw a decrease in their income from benefits, other than housing benefit, that meant their income was below the cap level.

500 households had changed in structure, 400 had changed the Local Authority they resided in, and 3,000 simply came under 'other'.

We don't know how many moved into employment because of the cap

The Department for Work and Pensions has previously been reprimanded by the UK Statistics Authority for suggesting that having benefits capped was the cause of all instances of a household member moving into employment.

Employment has risen over the past year as the economy has continued to recover from the recession, and we would expect households to flow into and out of the cap as they move in and out of employment anyway.

The Institute for Fiscal Studies (IFS) has estimated that the first year of the cap did make those affected more likely to move into work. Of the 42,000 households getting more than £500 per week in benefits in May 2013, they estimate about 2,000 had someone in the house get a job over the following 12 months in response to the cap.

This isn't all the households that had someone get a job in response to the cap since it was announced; it's one group observed over 12 months, and not all of these households actually had their benefit capped. In addition, some households may have reduced their benefit claims before May 2013 in reaction to the prospect of the cap.

While the IFS thinks the cap made people more likely to move into work, "… the large majority of affected claimants responded neither by moving into work nor by moving house".


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