Benefits Cap

Clause 93 of the Welfare Reform Bill allows the Government to introduce a 'Benefits Cap' from April 2013.

The Government is proposing to restrict or cap the total amount of 'welfare' a household can receive to the level of the median earnings after tax for working households ie around £500 per week in total benefits for couple and lone parent households; and for single adults, no more than £350 per week.

For information on who will be affected by the cap, how the cap will work, the impact it will have and ideas to minimise this, please click on the links.

Chris Grayling, Minister for Employment is quoted as saying during a debate in the House of Commons: 'Of course people on lower incomes can receive housing benefit, but I am not aware that it is paid to families earning £35,000 a year. Surely that is the point. We are setting a dividing line.'

However many families earning £35,000 a year do get substantial amounts of benefit, including Housing Benefit.

Take a couple with three children, and earning £35,000 gross a year. Assuming 2012/13 rates, £1,000 pa council tax and an affordable rent of £140.00 a week:

£20.25 Child Tax Credit per week
£47.10 Child Benefit
£25.78 Housing Benefit per week

£93.13 total weekly £4,842.76 annually

This is in addition to the £26444.45
Net salary after tax and NI.

What goes around comes around!

This is not the first time a Government has considered limiting benefits to wages. This policy idea has in fact been tried and failed once before. The ‘wage stop’ in force during the 1970s was a similar policy which aimed to cap benefits at the level of average wages. It proved unfair and unworkable and was eventually abolished. For more information on the wage stop, see this speech by Robin Cook who successfully campaigned for its abolition.