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Source: OBR, Economic and Fiscal Outlook, December 2014 *  Incapacity Benefit includes Employment and Support Allowance, severe disablement allowance, income support and incapacity benefit.

Source: OBR, Economic and Fiscal Outlook, December 2014
* Incapacity Benefit includes Employment and Support Allowance, severe disablement allowance, income support and incapacity benefit.

The benefit cap has so far saved around £100m a year, according to the Institute for Fiscal Studies – just 0.1 per cent of the total £215 billion benefits bill if we don’t count the budget for pensioners, the Daily Mirror tells us.

The cap affects 27,000 families – 1% of working age households, a figure revealed yesterday in a report published by the Department for Work and Pensions.

Those who have been hit have lost at least £46 per week, but only half the total lost that minimum amount; the rest lost much more than this. Overall the mean loss was £70 per week or £3,640 per year – around one-eighth of their total income prior to the cap. That means the DWP has bitten a huge chunk out of many household incomes.

However, this claimed saving does not take into account the many costs that could be associated with the cap. Vox Political stated last year that the cap was expected to save just £110m a year, meaning that it has not saved as much as the government hoped, “barely a rounding error in the £201bn benefits bill” – and you’ll notice that the bill has increased by £14 billion in the meantime.

VP continued: “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”.

So, taking these other costs into account, how much has the benefit cap saved now?

130715benefitcap

The Mirror article then gets into a more difficult area: The number of people who have moved into work as a result of the cap.

It reports: “’About 2,000 families who were claiming benefits in May 2013 had someone [who] moved into paid work twelve months later in response to the cap’, the IFS said.

“This can be accounted for by improvements in the labour market, as the FT also notes, but statisticians at the Department for Work and Pensions also found evidence that the cap itself had an impact.

“In particular, 20 per cent of families whose benefits were capped in May 2013 found work within a year.”

But 20 per cent of 27,000 is 5,400 – not 2,000. The IFS figure suggests 7.4 per cent.

What about the bold claims made by the DWP in July last year, that at first 8,000 and then 12,000 people had moved into work after being warned about the cap? As those figures clearly conflict with the new data, are we now to conclude that they were a blatant lie? If so, who committed it – civil servants or Iain Duncan Smith, the secretary of state?

Either way, the Mirror‘s verdict – that “there have been very limited fiscal benefits” – can only be taken as an extremely mild response to the figures.

If the Tories win the General Election next May, they have promised to cap benefits still further – from the current £26,000-per-year-per-family to £23,000.

Perhaps their slogan should be: “More austerity – less prosperity”.

Follow me on Twitter: @MidWalesMike

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