Thursday, 25 October 2012

Is the benefit cap really pushing thousands back into work?

Short answer: no. But a Daily Mail article nevertheless claims this is the case.

IDS claims that the upcoming benefit cap of £500 pw is causing 'thousands' of families to look for work. So that's already a bit of a climb down from them already going back into work, for a start. 1,700 people in this group have found work, which is 3% of the group. And we don't know over what time period that is: in any case it is a pretty low take-up rate.

The cap of £500 which starts in April 2013 will affect very few people. It will only apply to families with a lot of children. Families with a lot of children can indeed receive relatively high rates of benefits: after all, they have a lot of people to split that money between. On the other hand, it is not necessarily unreasonable to limit the number of children people can have and immediately request state support for them all.

But this is where the reasoning for this particular system of cap breaks down. It is wrong to compare it to the amount 'an average couple would earn in work'. This is for two reasons:
  1. A family of the same size with the parents in work can also claim a lot in benefits - possibly the same or even more than one out of work. (This is even lampshaded in the Mail article!)
  2. The £500 a week in benefits has to support between 5-8 people, whereas an average couple in work earning that only have to support two people. (And if they have children they will get additional money through benefits.)
The cap also creates a new 'couple penalty' - remember, that thing Cameron promised to abolish but hasn't? The cap applies per household. The obvious thing for a large family with two parents affected by the cap to do would be to split into two nearby households - who then only have a total cap of £1000 pw between them, which would be absolutely impossible ever to reach.

If the cap of a mere £500 per week really is causing 'thousands' people to look for work, how could IDS possibly know about it?

The only way would be where they are claiming jobseeker's allowance, the DWP would have a record of their jobsearch activity and requirements. But in that case, those jobsearch requirements would have already applied without the cap. Most families with children need to claim JSA, and to look for work as a basic condition of entitlement. That has been the law since the 1920s.

Look again at the exact words used:
 "Despite all the scaremongering, research now shows that of those housing benefit claimants affected by the cap, a third said they would now be looking for a job."
Note that it doesn't say this is new, or because of the cap. They could have been looking for a job all along - and must have been.

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