New analysis for the Child Action Poverty Group (CPAG) suggests that households whose benefits are capped will be left on average £65 a week worse off from April than they would be without a cap in place.
The warning comes after the latest inflation figures released by the Office of National Statistics (ONS) show that there was a slight dip from 10.1% in July to 9.9% in August - but still substantially higher than the 3.1% benefits uprating applied earlier this year.
The September Consumer Price Index (CPI) inflation figure is released in October and is used by the UK Government to determine the benefit uprating which is applied the following year. However, CPAG said that around 120,000 households whose benefits are already capped, affecting an estimated 300,000 children, will not see any rise when benefits are increased next April in line with the current inflation rate.
CPAG also said 35,000 claimants due to be newly capped in April will only see some of the increase before the cap kicks in.
The cap on benefits was introduced in 2013 and limits the amount of benefits that low-earning or non-working households across the UK can receive to £20,000. The amount of benefit a household receives is reduced to ensure claimants do not receive more than the cap limit.
The benefit cap can be applied through either:
- Universal Credit
- Housing Benefit
It is capped at £384.62 a week for families outside London and £442.31 a week for those in London. This is the same level as 2016, which means it has not increased to reflect the rising cost of living.
As a result, the number of capped households has risen over time, and CPAG said people have experienced a “growing gulf” between their income and rising costs.
It said removing the cap would mean an additional £65 a week, on average, for affected households, which it said would be “invaluable” in the current economic climate.
It would cost £500 million to remove the cap – just 0.2% of total spending on social security, it added.
CPAG chief executive Alison Garnham said: “The benefit cap is cruel and irrational at the best of times - many parents subject to it can’t escape it by working more because they are caring for very young children and housing costs are completely out of their control.
“But in the current crisis, its effects will be truly catastrophic for hundreds of thousands of children, pushing many into deep poverty.
“It is early days for the new Government and scrapping the cap would send a clear signal to families that the PM is on their side - there can be no doubt that leaving it in place will damage the lives of children up and down the country.”
The Department for Work and Pensions said the cap provides a strong work incentive and balances fairness for taxpayers with providing support.
Any revision of the cap would come alongside decisions to uprate benefits, with any change taking place the following April.
The Department referred to the UK Government’s £37 billion support package to help the public through the cost of living crisis and the new £2,500 cap on average energy bills announced by Prime Minister Liz Truss last week.
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