Opinion: Benefits cap – right or wrong?

There’s a lot in the news about the Benefits Cap following yesterday’s dismissal of the case where three single mothers took forward a legal challenge to the cap on their benefits.  They lost, but perhaps we as Liberal Democrats should question the logic behind the benefits cap.

Now, on one hand, when you look at it, £500 per week seems like a lot of money. Even for a family of three. With this in mind, it seems completely legitimate to cap the amount of support families receive to £26,000 per year. With the average earnings in the UK resting at £26,500, it seems unjustifiable the Government should sustain people out of work with more money than this.

That’s certainly the argument being made by the Coalition. We cannot support people with a sizeable amount of money who won’t or can’t work, is the message.

However, the implication is that this is disposable income. That a family of one woman with three dependent children has £500 spare a week after essentials.

This is where the facts have become blurred.

I live in what is considered an affluent area. A highly desirable location, as estate agents refer to it. Thirty five minutes from London, designer shops, green belt and Areas of Oustanding Natural Beauty surrounding me. The Surrey Hills is even soon to launch its own TV show to rival Made in Chelsea.

Yet there is a price to living here. The average rent for a family home (three bedrooms) in Guildford is £339pw. Or £17,628 per year. That leaves our family of four with £161 per week, or £8,372 to live on.

Take into account bills now – Council Tax is £150 per month for a Grade C property. The average fuel bill is £1420. Our family of four is now living on £99 per week. Without taking into account phone bills, transport costs (those children have to get to school) nor clothes, do you know how difficult it would be to feed a family of four on £99 per week?

Of course, the hard-left will say we are socially cleansing areas. But when you look at a nice town like Guildford, it’s not quite up there with the elite areas of Kensington and Chelsea. Yet the benefit cap is pricing families out of living here.

As a Liberal Democrat, I don’t want to see people reduced beyond the boundaries of poverty just to stay in their family home, near their friends and family.

Of course, alternative solutions are not easy – regionalised caps, rent capping, top-up funds. But there is a clear problem in turning the country into an Elysium style segmentation of rich and poor, working and non-working. And we need to tackle it head on.

* Kelly-Marie Blundell is a member of Federal Policy Committee, Vice Chair of the Social Security Working Group and previous parliamentary candidate

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  • Yup. This.

  • No, I disagree. The cap is eminently fair, and surely it is less fair to provide costs for a family in one area that are not applied elsewhere. My concern with the cap is that the number of children are not taken into account; if we believe benefits should be based on need, then the cap is blind to this. So I’d support a small variation based on that alone.

    On the other hand, delighted to see that the Government has lost on scrapping Independent Living Fund – now that’s a cut we should be campaigning against if ever there was one.

  • You say it is an “affluent area” and a “highly desirable location”. Doesn’t sound like a suitable area for someone in such poverty that they need to be claiming £26,000 of taxpayers money in benefits.

  • The cuts have come from social support systems and safety nets.

    I find it disappointing that we have cut society, not the debt.

  • Rebecca – yes, a young person cannot meet normal living costs on benefits. The job seekers allowance is below subsistence level and will not even increase in line with inflation.
    Is that a public health crisis up ahead, or an iceberg?

  • Chris Randall 6th Nov '13 - 3:32pm

    I have two things I don’t like is you could lose your home through no fault of your own the benefit caps should only apply after you have tried everything to get a job ie after six months of job hunting. The second thing is there would be no need of the cap if successive governments had not allowed the housing market to go so far out of balance it is in need of serious correction now . The answer of course is build more housing before you say couldn’t build enough soon enough well here in Hull it took till early 1948 to get everyone rehoused after the severe bombing of World War 2. ( before you say cannot have been that bad it as 94% of all homes had some damage some having sustained 4 or more hits largest tonnage of bombs dropped of anywhere per square mile. Also back in the late sixties they built here 6000 homes in 4 years and then 10,000 homes in the following 5 years and that is what is needed now that would cut benefit costs and remove the need for a benefit cap in the first place. It is called spend to save so lets stop giving money to private landlords and invest in people, famlies
    and the country rather then in private pockets with the tax I pay.

  • This year, job seekers allowance has been cut by 25% , though the use of cut-offs several months long.

    Housing benefits for the under 35s have been cut by up to 50%. There seem to be a lot more people sleeping on our streets around here.

    You lose your job, you lose your home. No wonder wages have been under such pressure.

  • @Rebecca Taylor: Yes you are quite correct, cap for childless single / couple is £350pw rather than £500. Still feel this would be the only fair way for additional variation though, rather than by location.

  • The benefits cap is clearly irrational.

    If people think that benefits in general are too high and they need to be calculated on different and less generous (I nearly wrote liberal) formulae, then that is at least a consistent stance,

    What makes no sense is to accept that the formulae are appropriate, but to say that the answers they give are unacceptable if they go beyond some arbitrary limit.

  • Chris Randall 6th Nov '13 - 3:51pm

    Yes but it is worse then that I have a friend who gets jobseekers allowance now £71.71 plus rent rebate and council tax rebate in April she found herself paying £5 a week council tax for the first time them her son left university in Loughborough and she found herself now paying £15 a week in rent because of the bedroom tax then her daughter was invalided out of the Army because of an injury she married her long term boyfriend and that meant paying a further £11 in rent charges how can we justify reducing someone’s benefit to effectively £40 in around 3 months. When they have done nothing wrong and there are no places to move to, worse it seems in some areas people are leaving homes they could rent empty, because they don’t want to fall foul of this bedroom tax, that some people to day have reported that people are being billed for their ground floor dining room because it has been reclassified a bedroom.

  • They were not homeless before.

  • Excellent article. The reality is that the benefit cap will price people out of much of inner London, with people already being moved to Milton Keynes and Birmingham. Is there really that much more of a chance of finding employment there than in London? In much of London, the benefit cap comes into play for families consisting of two or more children – these are by no means the giant families talked about my IDS so often.

    It’s also worth noting that the £26,000 figure is slightly misleading. A family who were receiving this as their earned income would be receiving at least £7,000 more from benefit payments (child benefit, working tax credit etc).

    But Chris above has put his finger on the biggest problem with this policy. In most cases, families will be receiving £26,000 or more in welfare payments because of high housing costs. These high housing costs are a symptom of a lack of supply of housing and a London-centric economy. Rather than address these issues, the Coalition is instead putting this cap in place – cap which incidentally saves very, very little money.

  • I agree this is not a fair cap, particularly when the majority of that money is thrown away on rent.

    Why do we not invest this money in housing instead – using it to pay for a new built home, or to buy a social home? In this way, the person or family will have a much more secure home where they can be part of their community, and the cost will reduce over time, rather than being expensive, and permanently at risk of eviction or rent rises.

  • Simon – the LHA will not cover most people’s home, since the cuts.
    That is why we are saying, if you lose your job, you lose your home.

  • The concept of a cap is inherently unfair. There is NO value of a cap which is socially just. Benefits should be set according to need. If we agree that someone needs X to raise their children, Y is feed and provide for themselves and Z to pay for accommodation then the only socially just amount to give them is X+Y+Z; arbitrarily deciding that value C is too much and thus limiting payments to X+Y+Z <= C is saying that the children of these people don't deserve to be raised to the same standard of living, that the people themselves don't deserve to live on so much or that they do not deserve the same standard of accommodation. That is not, and can never be, socially just.

    As it stands the coalition has chosen to punish a handful of claimants for the failure of successive governments – starting of course with Thatcher's – to control property prices and build sufficient affordable housing.

  • Tony Dawson 6th Nov '13 - 5:22pm

    The only reason why houses can be rented out at such high prices is that the government refuses to tax the capital land value effectively – for rather obvious political reasons.

    As for present rents in Guildford, average rents are or should be somewhat irrelevant when talking about people claiming benefits. The 1st decile average would be more appropriate:



  • Eddie Sammon 6th Nov '13 - 5:34pm

    Personally I think wrong, but not because we should never have a benefits cap, but because benefit cuts should have been the last resort. People will say “but it’s so popular”, but so were 120% mortgages before they crashed the economy.

  • Eddie Sammon 6th Nov '13 - 5:54pm

    The alternative to the benefits cap is not hiking taxes up either – we should have gone for the mega billions we spend on economic planning.

  • Kelly-Marie, whilst I get what you’re driving at, there are plenty of 3-bedroom places for £250pw in Guildford, rather than taking the maximum housing benefit of £340pw that you suggested.

    I’m not going to say that this makes life easy but people should be expected to move to cheaper accommodation if they’re currently renting.

    Of course, those owning a family home will find themselves much better off as a mortgage on a £270,000 house (quite generous) is only around £130pw.

  • First, the £26,000 is effectively a post-tax amount of money, so in terms of earnings it would be more like equivalent to the a salary of £35,000. That’s a lot of money – much more than that average earner.

    Now, what we’re talking about in terms of a “benefit cap” is a housing-benefit cap. The vast majority of the population understand that they have to live in an area they can afford. If they get a better job, they can move to a nicer area. If they lose their job they have to move to a cheaper area. There is no reason why this simple and obvious fact of life shouldn’t apply to people on benefits. It’s absurd that people in work who cant afford to live in central London should be taxed to that people on benefits can live in central London.

    It is housing benefit that is completely out of control and has ballooned the benefit bill. That this has happened isn’t a surprise, because the rate of housing benefit was linked not to wages or inflation or any other measure of ability to pay, but to rent values, and thereby to property prices. Housing benefit forms a floor in the rental price in the UK. Every time rents rise, the housing benefit floor dutifully rises with them, feeding back into the system and adding more to the bill.

    By now, housing benefit is a massive tax-payer subsidy for private landlords to the tune of £15bn a year. It’s utterly insane. The gigantic flow of housing benefit into the rental system is helping to inflate it. This needs to be dealt with in two ways:
    1. Cut housing benefit levels back down to a sensible level, which will itself depress rental prices
    2. Unlink housing benefit from rents

    The benefit cap will tackle #1, but I have yet to see any moves towards #2 – because politicians are afraid of it, even though it is the source of the problem. Wider measures to halt the rise in property and rental values would be a big help – and better tenancy rights (as in Europe) would go a long way to slowing the rise in rent values.

  • Andrew Suffield 6th Nov '13 - 8:06pm

    We cannot have this debate without also considering the opportunity costs. If we pay enough money for these people to stay in their expensive family home near their friends, what are we giving up to do it? How many people who live in real poverty could we feed with that money?

    And is that the right thing to do?

  • A Social Liberal 6th Nov '13 - 8:09pm


    If a working person cannot afford to live in Central London, can he/she not get housing benefits to allow them to afford it?

  • @Thomas Long
    “Of course, those owning a family home will find themselves much better off as a mortgage on a £270,000 house (quite generous) is only around £130pw.”
    Have you got the right amount there? That £130 looks more like a 170k mortgage over 25 years.

  • jedibeeftrix 6th Nov '13 - 8:31pm

    “If a working person cannot afford to live in Central London, can he/she not get housing benefits to allow them to afford it?”

    I have always felt I should live in the richer part of my town, can you suggest any means by how I might achieve this?

  • A Social Liberal 6th Nov '13 - 9:48pm

    You are funny Jedi

    Croydon the richer part of town? Haringey? Thanks for the giggle, got any more sage comments :o)

  • A Social Liberal 6th Nov '13 - 9:54pm

    Did a quick check on Zoopla and out of 73 3 bedroom houses in Guilford only 4 were under £250

  • Liberal Neil 7th Nov '13 - 12:53am

    @George – what you say is true. But I would guess it’s also true that many working people can only afford to live in the cheaper areas too. Most people have to make choices about where they live based on what they can afford. Why should people on benefits be any different?

  • Eddie Sammon 7th Nov '13 - 2:12am

    I don’t want to sound like a turncoat or moraliser – I used to support the benefits cap and still don’t have very strong feelings about it – it is just that I don’t fully understand what the negative effects of the policy are and I think corporate welfare should go before personal welfare, or at least be significantly cut. Yes too many people seemed to be living a life of luxury on benefits, but reform doesn’t always mean tough cuts.

    I know I’m framing economic planning as corporate welfare, but surely giving people enough money to keep a roof over their head, some warmth and something to eat, is going to be better for the economy than giving it to businesses that perhaps nobody else wants to fund? I know there are no easy solutions, but I think we could do better.

  • @Chris_sh – you can currently get a 95% mortgage for a £270k house, interest only (housing benefit only covers interest, I believe) for £130pw.

    @George – I used £250 as an example and yes, it’s near the bottom of the range but I’m sure there are plenty of viable options for below the £346 mark. Since the benefit cap gives you funds well above the average wage, it truly shows you how much normal working people must struggle to live in Guildford and the answer, as ever, is to reform our planning system to allow more house-building, not for the government to pay out more benefits to subsidise expensive property.

    @A Social Liberal – just did a Zoopla myself. Out of 199 3-bed houses in Guildford 57 are available for £300pw. My point was that using average house-price tells us very little.

  • As long as we allow private house ownership, we will always have affluent streets and areas that only a lucky few can afford to live in.

    We either accept this, or we run around green with envy, saying how a lucky few should be given money to live in these poor areas as some kind of “equality”.

    but they are still a lucky few, you either accept some levels of inequality, or you just create resentment over those few lucky enough to win lottery of life in regards to getting nice expensive housing on benefits.

  • Robert Wootton 7th Nov '13 - 11:53am

    At present the banking and economic system does not make it possible as it is presently constructed but I suggest that 20% of a household’s income or the full rent, whichever is the lower, should be paid to the landlord.With housing benefit making up the difference. But as I have said before, other structural changes the economic system as a whole would be necessary to make this a feasible proposition.

  • Stephen Howse 7th Nov '13 - 11:56am

    “Regionalisation seems the only way to move forward.”

    As someone in the North East, one of the less affluent regions in the UK – I would say not. How can we say we are ‘rebalancing the economy away from London and the South East’ if we are deliberately making people on benefits in regions that aren’t London or the South East worse off than those who are?

    Also, there are not just variations between regions, there are variations within them, so a regionalised cap (if based on average earnings in a region) would only serve to throw up at a regional level the same issues that are being raised by this cap at a national scale.

  • Tony Dawson 7th Nov '13 - 6:30pm

    @Kelly-Marie Blundell

    ” Rents cannot come down until we build more homes.”

    That’s not actually true. It might well be true that the present set of politicians determine that that is to be for the time being.

    We do need more homes. But not armies of 3-4 bedroom identikit boxes built to maximise profit on Green Belt.

  • Where does Beveridge say welfare should pay average wages ?

  • @Kelly-Marie Blundell

    ” Rents cannot come down until we build more homes.”
    Tony Dawson has already commented on the fact that this comment is wrong, however I would like to point you to the following website:

    Rental properties are dropping already, it would seem that this is put down to the Help to Buy scheme reducing demand in the rental sector. It is also possible that the cap is helping, if the market will not bear prices above the cap then landlords will need to reduce prices, sell up or watch an empty building.

    That’s not to say that building more homes isn’t desirable, it’s just that life isn’t as simplistic as this being the ONLY way of doing things.

  • Eddie Sammon 8th Nov '13 - 2:32am

    Personally, I wouldn’t send a penny to the house builders. We should either make it easier to build (I don’t have a clue about planning laws) or build them ourselves. Corporate welfare and repeating the stuff that their lobbyists say must end.

  • Eddie Sammon 8th Nov '13 - 2:40am

    In fact I would go even further and say we don’t even need to build more houses ourselves. If we don’t outsource it means we have to effectively build our own house building company in the civil service. A relaxation of planning seems the best way, but again, I don’t know much about it.

    We also need to get rid of this idea that people need to be compensated if we build near them – nonsense – if people want to benefit when house prices go up then they need to pay the price when house prices go down, it’s called risk and return.

  • Peter Davies 8th Nov '13 - 9:38am

    “Rental properties are dropping already, it would seem that this is put down to the Help to Buy scheme reducing demand in the rental sector. It is also possible that the cap is helping, if the market will not bear prices above the cap then landlords will need to reduce prices, sell up or watch an empty building.”
    Almost entirely down to the second (and other factors reducing the ability of tenants to pay). “Help to buy” has yet to have any effect and when it does, it will remove properties from the rented sector as well as tenants.

  • Malcolm Todd 8th Nov '13 - 10:34am

    Chris_sh and Peter Davies

    Looks to me like you’re both wrong. The report Chris_sh links to says right at the start that “The average advertised rent fell in almost every region in the third quarter of 2013, … but rents in Greater London continue upwards
    As London seems to be just about the only part of the country where the £500 cap will have an impact (since only exorbitant housing costs make it possible for most people to get anywhere near that level of benefit), it’s rather improbable that the cap is impacting on rents so far at all. The detail of regional rents and rent rises/falls in the report show that the areas with the lowest rents (the East Midlands and Yorks/Humber) are falling as much as anywhere else. And the report itself doesn’t even mention the cap as a potential cause. Is there any reason to believe it is having an effect, besides wishful thinking?

  • Peter Davies 8th Nov '13 - 10:57am

    @Malcolm Todd
    The picture is far more complex than you can see from just the average figure. There can be significant downward pressure in the few areas affected by the cap and from the more important housing benefit changes that affect the whole country but they are still easily outweighed by the bigger picture of a massive housing shortage especially in London.

  • There are already “caps” and set amounts for benefits:

    Jobseekers allowance is at a set level,
    child benefits are at a set level,
    housing benefits are at a set local level.

    This cap is set on a household. It is a way to manipulate a household to become smaller. It is pushing families to break up.

  • No-one gets benefits of £500 or £350, only landlords.

  • @Malcolm Todd
    What a strange statement.

    “As London seems to be just about the only part of the country where the £500 cap will have an impact ”
    And yet people here are saying that they can’t survive in Guildford because of the cap, I don’t live down there but surely it’s not part of (Greater) London (seems quite a way from the place on Google maps)? Are all of these people talking rubbish?

    The trouble with this article (and some of the comments) is that it is based on Nimbyism – we need cuts, but not in our back yard thank you very much. Think of the children!!! (or at least the children in our back yard).

    Personally I wasn’t sure if the cap was effecting rental prices (hence the use of the word possible). Peter Davies is right with his point about this being complex, without detailed research I don’t think you can say it is/isn’t – but it is possible that it is one of many factors helping with the reduction (perhaps along with things like improving confidence on the economy, meaning people are more willing to take the plunge and buy).

    Simply closing your mind to the possibility and demanding money is thrown at the issue isn’t really going to solve the problem though, is it?

  • The problem is that London and SE England is economically a different country. Immigration from both very wealthy foreigners and those i n Europe and other parts of the World looking for jobs are forcing up property prices.
    Lowland Britain is already one of the most densely populated countries in the World. Finance and businesses related to finance, entertainment, media , hi- tech industry( 24% of the country’s R and d is spent in SE England), the universities of London, Cambridge, Oxford and Imperial dominate R and D , water supplies are being stretched and many rivers are reaching their limit to cope with treated sewage -Nitrate Vulnerable Zones.

    The most expensive part of property is the land, foundations and the roof. What we have failed to do in the UK is build high quality flats :not more than 6 stories high. If the flats contained 2-3reception rooms, 1- 4 bedrooms, 10-12ft ceilings, had good sound insulation , balconies which were large enough to take dinner tables and shared gardens ( like private gardens in some parts of London- see film Notting Hill) , this would produce high density and high quality housing.. Much of the UK comprises small terrace house of the late 19C which are cramped, difficult to insulate and have low density . In most central parts of the European cities there are high quality flats.One reason why people are against flats is that there are few effective curbs against poor neighbours. In Austria, Switzerland and Germany there are strict rules which are enforced about bad behaviour. If one looks at the flats in central Paris , there are many attractive ones from the late 19Century

    What aspect which is ignored is the need to develop the economy out side of London and SE England. This will reduce inequality and take pressure of f SE England.

  • Much of the UK comprises small terrace house of the late 19C which are cramped, difficult to insulate and have low density .

    Actually c19th Victorian terrace and Georgian areas are typically the densest areas of cities, because post-war tower-blocks tend to be surrounded (poor quality) open green space.

    One reason why people are against flats is that there are few effective curbs against poor neighbours.

    Very true.

  • MBoy. True, that is why I suggested late 19C planning where home surrounded private garden. There are spacious flats in London , mainly around Hyde Park but most post 1945 flats tend to be small. Driving around and looking at flats , where they are higher than 6 stories , they appear to be too high. This is my own opinion and I would interested to read what other people think. The plush parts of central Paris tend to have blocks not more than 6 stories high.

  • Chris Holman 12th Nov '13 - 3:58pm

    In principle I think a cap on benefits is right & the present rate seems reasonably fair. Bearing in mind benefits are tax free the equivalent earnings before tax for someone who is working would be in the region of £31,000. In addition Child Benefit would be paid at the appropriate rate up to a salary of ~£50,000..
    No employer increases an employee’s salary because the rent on their house goes up or because they have had another child and there is a limit to what someone on benefits can reasonably expect to receive.
    The one change that should be considered is to take Child Benefits out of the cap figure, with an appropriate reduction. Up to the salary cap of £50k, those in work have no cap on the Child Benefits they receive, irrespective of the size of their family.

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