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.

CREDIT: GETTY
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Barb Jungr’s diary: Apart-hotels, scattered families and bringing the Liver Birds back to Liverpool

My Liver Birds reboot, set in the present day with new music and a new story, is coming to life at the Royal Court Theatre.

For the last three years I’ve been writing a musical. Based on Carla Lane and Myra Taylor’s Liver Birds characters Beryl and Sandra, but set in the present day with new music and a new story, it is coming to life at the Royal Court Theatre – in Liverpool, appropriately. Amazingly, the sun shines as the train ambles into Lime Street, where Ken Dodd’s statue has recently been customised with a feather duster tickling stick and some garlands of orange and lime green. Outside the station, composer Mike Lindup and I buy a Big Issue. We have a scene opening Act Two with a Big Issue seller and we are superstitious. We check into our “apart-hotel”. Apart-hotel is a new word and means a hotel room with a kitchen area you will never, ever use.

At the theatre everyone hugs as though their lives depend on it; we are all aware we are heading into a battle the outcome of which is unknown. There will be no more hugging after this point till opening night as stress levels increase day by day. I buy chocolate on the way back as there’s a fridge in my apart-hotel and I ought to use it for something.

Ships in the night

There’s no point in being in Liverpool without running by the river, so I leap up (in geriatric fashion) and head out into the rain. You’d think, since I grew up in the north-west and cannot ever remember experiencing any period of consecutive sunny days here, that I’d have brought a waterproof jacket with me. I didn’t. It springs from optimism. Misplaced in this case, as it happens. I return soaking but with a coconut latte. Every cloud.

We have been in the theatre for seven hours. Everything has been delayed. The cast are amusing themselves by singing old television themes. They have just made short shrift of Bonanza and have moved on to The Magic Roundabout. We may all be going very slightly mad.

As hours dwindle away with nothing being achieved, Mike and I pop to the theatre next door to enjoy someone else’s musical. In this case, Sting’s. It’s wonderfully palate-cleansing and I finally manage to go to sleep with different ear worms about ships and men, rather than our own, about Liverpool and women.

Wood for the trees

This morning “tech” begins (during which every single move of the cast and set, plus lighting, costume, prop and sound cues must be decided and logged on a computer). Problems loom around every piece of scenery. Our smiles and patience wear thin.

By the end of the 12-hour session we know we have the most patient, professional cast in the known cosmos. I, on the other hand, am a lost cause. I fret and eat, nervously, doubting every decision, every line, every lyric. Wondering how easy it would be to start over, in forestry perhaps? There is a drug deal going on across the road in the street outside the hotel. My apart-hotel kitchen remains as new.

First preview

I slept like a log. (All those years of working with Julian Clary make it impossible not to add, “I woke up in the fireplace”.) At the crack of dawn we’re cutting scenes in the Royal Court café like hairdressers on coke. Today is ladies’ day at Aintree, which feels apropos; tonight we open Liver Birds Flying Home, here.

The spirit of Carla Lane, who died in 2016, always dances around our consciousness when we are writing. She was very good to us when we began this project, and she was incredibly important to my teenage self, gazing out for role models across the cobblestones.

I grew up in Rochdale, a first-generation Brit. My parents had come here after the war, and what family we had was scattered to the four winds, some lost for ever and some found much later on, after the Velvet Revolution. I had a coterie of non-related “aunties” who felt sorry for us. Ladies with blue rinses, wearing mothball-smelling fur coats in cold houses with Our Lady of Fátima statues lit by votive candles in every conceivable alcove. To this day, the smell of incense brings it all back. Yet the northern matriarchy is a tough breed and I’m happy to carry some of that legacy with pride.

Seeing the theatre fill with people is terrifying and exciting in equal measure. We’ve had to accept that the finale isn’t in tonight’s show because of lack of technical time. I’m far from thrilled. The show, however, has a life of its own and the actors surf every change with aplomb. The audience cheers, even without the finale. Nonetheless, I slouch home in despair. Is it too late to change my name?

Matinee day

The fire alarm is going off. I know that because I’m awake and it’s 4am. As I stand in reception among the pyjama-clad flotsam and jetsam of the apart-hotel, I suspect I’m not the only one thinking: if only they’d had alarms this annoyingly loud in Grenfell. I don’t go back to sleep. I rewrite the last scene and discuss remaining changes for the morning production meeting with my co-writer, George.

The Saturday afternoon performance (which now includes the finale) receives a standing ovation in the circle. The ratio of women to men in the audience is roughly five to one. In the evening performance it is 50/50, so I’m curious to see how Beryl and Sandra’s story plays to the chaps who’ve been dragged out on a Saturday night with their wives. In the pub after the show a man tells Lesley, the actress playing present-day Beryl, how moved he had been by what he’d seen and heard.

A few years ago I stood behind Miriam Margolyes as we were about to go on stage at the Royal Festival Hall in a Christmas show. She turned to me, saying, “Why do we do this to ourselves?” We agreed: “Because we can’t do anything else!” I suspect forestry is out of the question at this juncture. 

“Liver Birds Flying Home” is at the Royal Court, Liverpool, until 12 May.

Barb Jungr is an English singer, songwriter, composer and writer.

This article first appeared in the 18 April 2018 issue of the New Statesman, Enoch Powell’s revenge