Five reasons why the benefit cap is wrong

The £26,000 cap, which is introduced in four London boroughs today, will raise child poverty, increase homelessness and cost more than it saves.

Whichever Conservative first came up with the line that "no out-of-work family should receive more in benefits than the average family receives from going out to work" probably deserves some sort of prize. The policy to which it refers - the benefit cap of £26,000 - has been framed so as to make reasonable disagreement appears impossible. Who can argue that it should pay more to be on welfare than in work? It’s unsurprising, then, that the policy is one of the coalition’s most popular (perhaps even the most popular). A YouGov poll published earlier this month found that 79 per cent of people, including 71 per cent of Labour voters, support the cap, with just 12 per cent opposed. But while politically astute, the cap, which is introduced in four London boroughs today (Bromley, Croydon, Enfield and Haringey), before being rolled out nationally from July, may be the most flawed of all of the coalition’s welfare measures. Here are five reasons why.

1. An out-of-work family is never better off than an in-work family

The claim on which the policy rests - that a non-working family can be better off than a working one - is a myth since it takes no account of the benefits that an in-work family can claim to increase their income. For instance, a couple with four children earning £26,000 after tax and with rent and council tax liabilities of £400 a week is entitled to around £15,000 a year in housing benefit and council tax support, £3,146 in child benefit and more than £4,000 in tax credits.

Were the cap based on the average income (as opposed to average earnings) of a working family, it would be set at a significantly higher level of £31,500. The suggestion that the welfare system "rewards" worklessness isn’t true; families are already better off in employment. Thus, the two central arguments for the policy - that it will improve work incentives and end the "unfairness" of out-of-work families receiving more than their in-work equivalents - fall down.

(And it will hit in-work families too)

Incidentally, and contrary to ministers' rhetoric, the cap will hit in-work as well as out-of-work families. A single person must be working at least 16 hours a week and a couple at least 24 hours a week (with one member working at least 16 hours) to avoid the cap. 

2. It will punish large families and increase child poverty

The cap applies regardless of family size, breaking the link between need and benefits. As a result, most out-of-work families with four children and all those with five or more will be pushed into poverty (defined as having an income below 60 per cent of the median income for families of a similar size). Iain Duncan Smith has claimed that “[at] £26,000 a year it's very difficult to believe that families will be plunged into poverty” but his own department’s figures show that the poverty threshold for a non-working family with four children, at least two of whom are over 14, is £26,566 - £566 above the cap. The government's Impact Assessment found that 52 per cent of those families affected have four or more children.

By applying the policy retrospectively, the government has chosen to penalise families for having children on the reasonable assumption that existing levels of support would be maintained. While a childless couple who have never worked will be able to claim benefits as before (provided they do not exceed the cap), a large family that falls on hard times will now suffer a dramatic loss of income. In view of this, the House of Lords voted in favour of an amendment by Church of England bishops to exclude child benefit from the cap (which would halve the number of families affected) but the defeat was subsequently overturned by the government in the Commons.

The DWP has released no official estimate of the likely increase in child poverty but a leaked government analysis suggested around 100,000 would fall below the threshold once the cap is introduced.

3. It will likely cost more than it saves

For all the political attention devoted to it, the cap is expected to save just £110m a year, barely a rounding error in the £201bn benefits bill. But even these savings could be wiped out due to the cost to local authorities of homelessness and housing families in temporary accommodation. As a leaked letter from Eric Pickles’s office to David Cameron stated, the measure "does not take account of the additional costs to local authorities (through homelessness and temporary accommodation). In fact we think it is likely that the policy as it stands will generate a net cost. In addition Local Authorities will have to calculate and administer reduced Housing Benefit to keep within the cap and this will mean both demands on resource and difficult handling locally."

4. It will increase homelessness and do nothing to address the housing crisis

Most of those who fall foul of the cap do so because of the amount they receive in housing benefit (or, more accurately, landlord subsidy) in order to pay their rent. At £23.8bn, the housing benefit bill, which now accounts for more than a tenth of the welfare budget, is far too high but rather than tackling the root of the problem by building more affordable housing, the government has chosen to punish families unable to afford reasonable accommodation without state support.

The cap will increase homelessness by 40,000 and force councils to relocate families hundreds of miles away, disrupting their children's education and reducing employment opportunities (by requiring them to live in an area where they have no history of working). 

5. It will encourage family break-up

Iain Duncan Smith talks passionately of his desire to reduce family breakdown but the cap will serve to encourage it. As Simon Hughes has pointed out, the measure creates "a financial incentive to be apart" since parents who live separately and divide the residency of their children between them will be able to claim up to £1,000 a week in benefits, while a couple living together will only be able to claim £500.

Work and Pensions Secretary Iain Duncan Smith speaks at the Conservative Party conference in Birmingham last year. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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The real question about George Osborne and the Evening Standard? Why he'd even want the job

The week in the media, from Osborne’s irrelevant editorship to the unrepentant McGuinness and Vera Lynn’s stirring ballads.

The big puzzle about George Osborne’s appointment as the editor of the London Evening Standard is why he wanted the job. The Standard is now just a local freesheet, a pale shadow of its old self. In Tube carriages, discarded copies far exceed those being read. Its columnists are lightweight [Ed: as an occasional columnist myself, thanks, Peter] and its news stale, mostly written the previous day. Critics of Osborne’s appointment describe the Standard as “a major newspaper”. It is no such thing. The idea that the editorship will allow the former chancellor to propel himself towards the London mayoralty is laughable. In last year’s election for mayor, the Standard, according to University of London research, ran twice as many positive headlines about the Tories’ Zac Goldsmith as it did about Labour’s Sadiq Khan. The latter won comfortably. The paper was so supportive of Khan’s predecessor, Boris Johnson, that it became known as “the Daily Boris”. But Johnson, with a high profile from television, hardly needed its backing to beat a tired and largely discredited Ken Livingstone.

If Osborne believes that the Standard offers him a significant political platform, it is just further proof that he belongs to an ignorant elite.

 

Violent legacy

More than anyone else, Martin McGuinness, who has died aged 66, represented how the IRA-Sinn Fein combined uncompromising violence with negotiating charm to achieve its aims. Unlike Gerry Adams, McGuinness admitted openly and proudly that he was a senior IRA commander. In Londonderry on Bloody Sunday in 1972 he carried a sub-machine gun, but apparently without using it. Later that year, he was among a delegation that held secret talks with British ministers and officials. The following year, he was arrested near a car containing prodigious quantities of explosives and ammunition.

Like many who recall the IRA’s campaign in mainland Britain – three huge bombs detonated less than half a mile from me – I could never quite accept McGuinness as a government minister and man of peace. Whatever he said, he did not renounce ­violence. He just had no further use for it, a decision that was reversible.

 

A peace of sorts

When I hear politicians saying they could never contemplate talks with al-Qaeda, I smile. They said the same about the IRA. The idea of negotiation, John Major said, “turns my stomach”. A month later, news leaked of secret talks that would lead to a ceasefire. You can call it hypocrisy but politicians have no practical alternative. Significant terrorist campaigns rarely end without deals of some sort. Even then, dishonesty is necessary. The parties to the Good Friday Agreement with Sinn Fein in 1998 never admitted the true terms, perhaps even to themselves. In return for a role in government, the IRA ceased attacks on the British mainland, army, governing classes and commercial interests. It remained in control of working-class Catholic enclaves in Northern Ireland, where it continued to murder, inflict punishment beatings and run protection rackets. Not a pretty bargain, but it brought peace of a sort.

 

Real war anthems

“We’ll Meet Again” and “The White Cliffs of Dover”, sung by Dame Vera Lynn, who has just celebrated her 100th birthday, are the songs most closely associated with the Second World War. This, when you think about it, is peculiar. Most wars are associated with stirring, patriotic anthems, not sentimental ballads. Even the First World War’s “Keep the Home Fires Burning”, before it mentions hearts yearning for home, stresses the noble, manly instincts that drove soldiers to fight: “They were summoned from the hillside/They were called in from the glen,/And the country found them ready/At the stirring call for men.” Lynn’s songs had only the wistful sadnesses of parting and reassurances that nothing would change.

Their “slushy” tone troubled the BBC. It feared they would weaken the troops’ fighting spirit. Despite Lynn’s high ratings among listeners at home and service personnel overseas, her radio series was dropped in favour of more virile programmes featuring marching songs. Unable to sing to her forces fans over the airwaves, Lynn bravely travelled to the army camps in Burma. A BBC centenary tribute showed veterans of the war against Japan weeping as her songs were played back.

The wartime role of this unassuming plumber’s daughter makes me – and, I suspect, millions of others – feel prouder to be British than any military anthem could.

 

Ham-fisted attempt

After his failed attempt to increase National Insurance contributions for the self-employed, Philip Hammond, it is said, will have a £2bn hole in his budget. It will be more than that. Thanks to the publicity, tens of thousands more workers in regular employment will be aware of the tax advantages of self-employed status and hasten to rearrange their affairs. Likewise, newspaper accountants of old, after circulating memos imploring journalists to reduce lavish claims for “subsistence” while covering stories away from the office, would find a sharp rise in claims from hacks previously unaware that such a perk existed.

 

Battle of Hastings

My fellow journalist Max Hastings, attending a West End play, was once dragged on stage by the comedian James Corden, told to help move a heavy trunk and slapped on the bottom. Ever since, I have approached plays starring comedians warily. I dropped my guard, however, when I bought tickets for a contemporary adaptation of Molière’s The Miser starring Griff Rhys Jones, and found myself drenched when Jones spilled (deliberately) what purported to be fine wine. It was of course only water and, unlike
Hastings, I shall not demand a refund.

Peter Wilby was editor of the Independent on Sunday from 1995 to 1996 and of the New Statesman from 1998 to 2005. He writes the weekly First Thoughts column for the NS.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution