Iain Duncan Smith. Photo credit: Brian Minkoff - London Pixels / Foter / CC BY-SA

The government’s controversial benefit cap has only reduced the total spend on Housing Benefit by a pitiful 0.5%, new figures suggest. 

The cap, which has so far affected around 27,000 households, limits the amount a couple can receive in certain benefits to no more than £500 a week – reduced to £350 for single people.

Figures released today by the Department for Work and Pensions (DWP) claim the £26,000 a year cap is helping to encourage unemployed people into work, saving £100 million a year in Housing Benefit payments.

However, once you take a look at how Housing Benefit bill is forecast to grow substantially over the next few years, modest savings achieved so far through the benefit cap could be quickly wiped out.

Despite a fall of £425 million in 2013 – partly due to the hated ‘bedroom tax’ – the UK’s Housing Benefit bill is forecast to begin rising once again before reaching a new high of £25bn a year by 2017. This is then expected to grow by a further £400 million over the next two years (2017-19).

Benefit cap saving are also undercut by Discretionary Housing Payments (DHP), financial support given to families struggling to pay their rent due to the cap on benefits and the vicious ‘bedroom tax’. The fund increased from £20m in 2010-11 to £184m in 2013-14.

And years of stagnant wage growth in the face of brutal austerity measures, mean more working families are having to claim Housing Benefit to help keep a roof over their heads.

A low-wage economy and the shocking rise in insecure self employment and zero-hours contracts could mean people moving into work would be reliant on in-work benefits. Experts agree that moving off of benefits and into a job is no longer a guaranteed route out of poverty. For the first time in history working people are now more likely to be living in poverty than the unemployed.

According to DWP figures “those who would be impacted by the cap are 41% more likely to go into work than a similar group who fall just below the cap’s level”.

The DWP say 38% of those capped were doing more to find work, a third were submitting more applications and 1 in 5 went to more interviews.

Where households said they intended to seek work because of the cap in February 2014 (45%), by August the vast majority of them (85%) had done so – 2 in 5 (40%). Of those who said they had looked for work because of the cap in February actually entered employment by August.

It remains unclear as to what sort of employment those affected by the benefit cap are moving into. Whether it be low-paid zero-hours jobs, self employment or something altogether more rewarding.

Work and Pensions Secretary Iain Duncan Smith said: “We know that the benefit cap has had a real impact in changing attitudes and behaviours, and now we have evidence showing that our welfare reforms are encouraging people into work.

“By putting an end to runaway benefit claims and introducing a system which guarantees you will always be better off in work, we are incentivising people find employment. Every month hundreds of people who have been affected by the cap are making the positive move into work – gaining the financial security and esteem that comes with a job and a pay packet.

“As part of our long-term economic plan, we’ll continue to support people to break free from welfare dependency so they can look forward to a better, more secure future for themselves and their families.”

The DWP also claim “scare stories” warning the benefit cap would push the poor out of London have been proven to be incorrect. According to government research, of those capped households living in inner London that moved, 84% continued to live in the central boroughs. They’re also “70% more likely to go into work than their equivalents just below the cap”, the research said.


  1. It is highly likely that the people affected will be in low paid work or zero hours contract It is also likely that the people who have found work are worse of than they were before It is also likely that a significant number will be claiming tax credits. Result will be lower claims in housing benefit and higher claims in tax credits so how much will be saved overall?

    • In short nothing. Because low wages mean more people in work or having to claim Housing Benefit, or the equivalent LHA. There is also increased administrative costs which have not been looked into in depth. Basically, people are simply being moved from one source of low-income to another.

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