Welfare reform: annual report 2019

6. The benefit cap

The benefit cap, introduced in 2013, is a policy that sets a limit on the total annual payment a household can receive from means-tested benefits. Since 2016, the benefit cap has been set at £20,000 per year for couples and single parents and £13,400 for single adults across the UK, with a higher cap in London. The cap is implemented through a reduction in either Housing Benefit or UC, depending on whether the household remain on legacy benefits or have already moved onto UC. Households that qualify for Working Tax Credits, or are on UC and earn more than £542 per month, are exempt from the cap. 

A total of 3,320 Scottish households were benefit capped as of May 2019. The cap disproportionately affects families with children. Based on the most recent data, covering May 2019,^[36] of the 2,730 households whose Housing Benefit has been capped, two thirds (1,820) were lone parent households and only 9% (270 households) were not responsible for children. Of the 91% of households which contain children, 87% are large families which care for three or more children. 

Among Housing Benefit-capped families, the average amount capped each week was £64, equivalent to around £3,320 per year. Among households with either capped UC or Housing Benefit, most of those who are capped (1,820) lose up to £50 a week, however a substantial number (1,480) lose more than that, as shown in figure 2 below.

Figure 2 – Number of Scottish households benefit capped in May 2019, by weekly amount capped

Source: DWP (2019), Benefit Cap: number of households capped to May 2019

A recent report by the House of Commons Work and Pension Committee^[37] highlighted that only 18% of the legacy benefit claimants whose Housing Benefit is capped claim Jobseeker’s Allowance. The remaining 82% of affected claimants receive benefits which do not require them to look for work for reasons of ill-health or childcare responsibilities. Policy in Practice estimated^[38] that for every 100 households affected by the cap, only around four will move into work because of it. Similarly, in DWP’s 2014 study benefit capped households were found to be only around 4.7% more likely to move into work than similar, but uncapped, households.^[39] 

In 2019/20, the Scottish Government allocated £8.1 million to local authorities to provide support to benefit capped families through the Discretionary Housing Payment system.^[40]