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13 January 2014

Duncan Smith hints at cut in the benefit cap

Work and Pensions Secretary says "we will keep the policy under review" when asked whether the cap could be reduced from £26,000.

By George Eaton

One of the welfare cuts that George Osborne is most likely to make if the Tories win the next election is a reduction in the household benefit cap of £26,000. Conservative MPs regularly complain that their constituents regard the cap (the equivalent of a pre-tax income of £35,000) as too high and would like to see it significantly reduced. The most recent YouGov poll found that 76% of the public support a cap of £26,000 and that 49% favour one of £15,000. Asked by Tory MP Andrew Bridgen at Work and Pensions questions whether the benefit cap would be reduced, Iain Duncan Smith replied: “we will keep the policy under review”, a clear hint that the government is considering a cut. 

While the cap might appear generous, it’s important to remember that those households who receive £26,000 do so due to high rents and/or an above average number of children; the government’s Impact Assessment found that 52% of those families affected have four or more children.

The premise on which the policy is based – that an out-of-work household should never receive more in benefits than the average household receives from going out to work – is a false one 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 the significantly higher level of £31,500. But don’t expect ministers to mention any of this. 

Elsewhere during the session, Duncan Smith replied to a question on Benefits Street from Tory MP Philip Davies (who complained of claimants who “combine complaining about welfare reforms whilst being able to afford to buy copious amounts of cigarettes, have lots of tattoos done and watch Sky TV on the obligatory widescreen television”) by stating: “He’s right. Many people are shocked by what they see. But the reality is that is why the public backs our welfare reform package to get more people back to work, to end these abuses, and all of these abuses date back to what the last government left, with massive spending and trapping people in benefit dependency.”

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