Five things Iain Duncan Smith doesn't want you to know about the benefit cap

Including why an out-of-work family is never better off than an in-work family, why it will cost more than it saves and why it will increase homelessness.

Iain Duncan Smith has been touring the studios this morning, rather unpleasantly referring to people "being capped". The policy which he's promoting - the benefit cap of £26,000 - is introduced nationally today (after being piloted in Bromley, Croydon, Enfield and Haringey) and is one of the coalition's most popular. A YouGov poll published in April 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 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). 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. It was this that led the House of Lords to vote 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

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.

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

George Eaton is political editor of the New Statesman.

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Why I’m thinking of joining the Labour Party

There’s a lot to admire in the direction Jeremy Corbyn is taking the party – perhaps it’s time to get involved.

Why I’m leaving Labour”, as Owen Hatherley remarked a few days ago, appears to be the new “why I’m leaving London”. However, aside from a few high(ish) profile departures, the bigger story is the net increase in membership of 90,000 that Labour has enjoyed since Jeremy Corbyn became leader. Indeed, the last few weeks have got me seriously considering whether I should add to these impressive numbers and join the party myself.

For me, one of the most cheering pieces of news since Corbyn’s victory was the convening of an advisory committee to shadow chancellor John McDonnell, including policy and academic heavyweights such as Mariana Mazzucato, Ann Pettifor, Joseph Stiglitz and Thomas Piketty. It was a clear indication that some fresh and serious thought was going to be put into the creation of a plan for remaking and rejuvenating the British economy. The early signs are that Labour will be offering a dynamic, high-tech economy of the future, with good pay and job security at its heart, which will stand in sharp contrast to the miserable Randian dystopia George Osborne has been pushing the country into during his time at the Treasury.

Also refreshing has been Corbyn’s use of Prime Minister’s Questions to give a voice to those affected by austerity. Given that our media and political class is disproportionately populated by people from privileged backgrounds, it’s really important that an extra effort is made to ensure that we hear first-hand from those bearing the brunt of these policies. It’s right in principle, and it turns out to be good politics as well. Because apparently many Conservative MPs are too stupid to realise that responding to the concerns of working class people with loud, derisive braying merely provides the public with a neat and powerful illustration of whose side each party is on.

Corbyn has taken a lot of flak in the media, and from MPs on the Labour right, for his response to the Paris attacks. But as someone who researches, teaches and writes on British foreign policy, Middle East politics and security issues, my admiration for the Labour leader has only grown in recent days.  

In the atmosphere immediately after a terrorist atrocity, a discourse emerges where caring about the victims and being serious about dealing with the threat are taken to be synonymous with advocating military responses and clampdowns on civil liberties, irrespective of the fact that fourteen years of pursuing this approach under the “war on terror” has only served to make the problem far worse. At times like these it takes a great deal of courage to articulate a careful, cautious approach emphasising non-military forms of action that address root causes and whose effects may be less dramatic and immediate. Many people were simply not in the mood to hear this sort of thing from Corbyn, but his policies are objectively more likely to make us safer, and I admire him for not being intimidated into silence despite the gallons of vitriol that have been poured on him.

In general, on national security, there is something heavily gendered about the narrative that casts the alpha male Cameron keeping Britain safe versus the dithering milquetoast Corbyn who doesn't understand the harsh realities. We reached the nadir of this stone age machismo during the last election campaign when Very Serious Jeremy Paxman put it to Ed Miliband that he couldn’t have Vladimir Putin in a fight.  After the disasters of the last decade and a half, the time is right to articulate a more intelligent, sophisticated alternative to the expensive, counterproductive militarism of the Conservative Party and the Labour right wing.

The question of whether Corbyn can win an election is certainly one that preoccupies me. He will struggle to attract voters to his right just as Yvette Cooper, Andy Burnham or Liz Kendall would have struggled to win back votes Labour lost to the SNP and the Greens. Enthusing and rallying the perhaps 30 per cent of the electorate who are broadly on the left is one thing, but adding the other 6-7 per cent that you need to win an election is another challenge altogether. Corbyn and his team have been on a steep learning curve since their shock victory in September, and they urgently need to clarify their message and improve their media strategy. Almost all the corporate press are bound to remain hostile, but there are ways to provide them with as little ammunition as possible.

More importantly, Corbyn’s team need to find ways of connecting directly with the public and bring them actively into what he's trying to do. In the current anti-politics mood, an opposition party based on a genuine, engaged mass movement could be a formidable force. Initiatives like “Momentum” will need to make quick and substantial progress.

Fundamentally, Corbyn’s Labour has to do what everyone concerned with genuine social progress has had to do throughout history: articulate points of view that go against prevailing orthodoxy, and do so in as persuasive a way as possible. By definition, these are battles against the odds. But you can't win them if you don't fight them. And for me, and I think most people on Corbyn's part of the left, five years of austerity have taken us beyond the point where we can accept the least worst version of the status quo. That prospect has simply become too painful for too many people.

So will I join? I’m still unsure. Without doubt there will be times when the leadership needs constructive, even robust criticism, and as a writer and researcher I may feel more free to articulate that outside of the Labour tribe. But whatever choice I make, the point for me is that this isn’t really about Jeremy Corbyn so much as the wider movement he represents, demanding a real change of course on politics, economics and foreign policy. That collective effort is something I will certainly continue to play an active part in.

David Wearing researches UK-Saudi-Gulf relations at the School of Oriental and African Studies, where he teaches courses on Middle East politics and international political economy. He sits on the steering committee of Campaign Against Arms Trade.