46% of capped households lose more than £50 a week

The Department for Communities has released statistics covering the application of the benefit cap. Of the 1160 households subject to the benefit cap in July 2019, 530 had their benefits reduced by at least £50 a week as a result of this policy.

What is the benefit cap?

The benefit cap was announced by the Coalition Government in 2010 and, alongside the bedroom tax, the measure has proved to be one of the most controversial elements of the welfare reform programme entered into by that and subsequent Governments. The cap is supposed to incentivise work and create a fairer welfare system by ensuring that households in receipt of benefits do not end up financially better off than working households. Currently, a household whose benefit income exceeds the cap amount will see a corresponding reduction in the amount of Housing Benefit they receive, or in their award of Universal Credit. The annual cap rates were initially set at £26,000 for families and £18,200 for single person households, but these rates were reduced to £20,000 and £13,400 respectively in November 2016.

Local impact of benefit cap

The most recent statistics released by the Department for Communities show that 3,230 households have had their benefits reduced as a result of the cap since June 2016. In July 2019, a total of 1,160 households in receipt of Housing Benefit were receiving a reduced amount of rental assistance as a result of the benefit cap. A further 140 households in receipt of Universal Credit were subject to the cap, and the Department intends to publish a further report in November 2017 which will include details of those capped under Universal Credit.

The average amount by which benefits are reduced for those subject to the cap is a substantial £47 per week, meaning that these households must find an additional £200 each month to put towards their rent.

Assistance for households affected by the benefit cap

As part of the package of measures contained in the Fresh Start Agreement, households in Northern Ireland who are subject to the benefit cap may be able to claim a welfare supplementary payment to mitigate some of the hardship caused by this policy.

However, this approach brings with it a number of problems, not least the fact that the mitigation schemes agreed under Fresh Start are due to expire in March 2020.

Aside from this fast-approaching cliff-edge, the use of the welfare supplementary payments to offset the impact of the benefit cap has additional limitations. The payment is only available to offset the amount by which a household is first capped. If, as commonly happens, a household’s is capped by a greater amount due to a change in circumstances (e.g. a new baby is born, triggering additional entitlement to benefit and, consequently, a greater reduction in the amount of benefit the household should receive and the amount it now does receive), the amount that the household receives in a welfare supplementary payment cannot increase to reflect the increased cut to Housing Benefit.

Additionally, in order to be entitled to a welfare supplementary payment, the household in question must have been resident in Northern Ireland in November 2016 and entitled to a qualifying benefit on each day between the introduction of the benefit cap and the date on which they were first affected by the policy. This means who have recently moved or returned to Northern Ireland are likely ineligible for this assistance, as are households who were not in receipt of relevant benefits (including Child Benefit) on the date the cap was introduced.

Discretionary Housing Payments for benefit cap claimants

Where a person is not entitled to a Welfare Supplementary Payment to help with hardships experienced by the benefit cap or where the amount of the supplementary payment doesn’t plug the full shortfall, the clamant may be able to apply for a Discretionary Housing Payment. But, this brings its own problems.

Firstly, discretionary housing payments are discretionary. There is no guarantee that the claimant will receive a payment and it may not cover the full shortfall. These are also time-limited payments, which only provide limited release from affordability pressures and the threat of homelessness due to arrears.

Secondly, the legislation setting out entitlement to Discretionary Housing Payments in Northern Ireland is very specific. In order to satisfy the eligibility requirements, a claimant must show that their Housing Benefit or Universal Credit has been restricted by specific measures (including the benefit cap and Local Housing Allowance) and that they require further assistance with their housing costs as a result of this. However, tenants who receive Universal Credit to help with their housing costs will likely find it very difficult to meet these requirements.

In Northern Ireland, the housing costs element of Universal Credit is usually paid directly to the landlord, rather than to the recipient. The intention behind this arrangement was to safeguard households’ tenancies by ensuring that rent payments were made directly to landlords, thereby reducing the risk of possession due to arrears.

An unintended by-product of this arrangement and the limitations of the DHP regulations is that households who receive Universal Credit and who are subject to the benefit cap may not be able to show that they need additional help to meet their housing costs as and, as a result, are unable to apply for the discretionary assistance that they would be entitled to if in receipt of Housing Benefit.