Number of London households affected by benefit cap doubles as a result of COVID-19-related benefit increases

New report also finds that the continued presence of the cap means that for some households the effects of recent LHA, universal credit and tax credit increases will be limited or never felt at all

The number of households in London affected by the benefit cap has doubled as a result of COVID-19-related benefit increases, according to Policy in Practice.

In a new report,‘The interaction of COVID-19 measures and the Benefit Cap on low-income Londoners’, Policy in Practice compares numbers and incomes of households subject to the benefit cap in London both before and after increases in local housing allowance (LHA) rates and personal allowances for universal credit and tax credits were introduced in April 2020 as part of the government’s response to the COVID-19 pandemic.

Using administrative housing benefit and council tax reduction data from 17 London boroughs, together with its Benefit and Budgeting Calculator, Policy in Practice predicts the benefit awards of around 430,000 households, finding that -

• households that were already capped prior to the COVID-19 outbreak have not received increases in benefits worth an average £219 per month;
• newly capped households are predicted to lose increases worth an average £185;
• private sector renters with children who were already capped have not received increases worth £431 per month on average - those newly capped since benefit increases were introduced will not receive an average £400 per month;
• 22,300 existing claimants in London will not see an increase in income as a result of the new measures -11,700 on legacy benefits and 10,600 on universal credit; and
• 22,000 existing claimants became capped as a result of the April 2020 COVID-19 benefit increases, raising the number of households subject to the cap in London by 94 per cent to 44,300.

In addition, Policy in Practice warns that London could see anywhere between 25,300 and 63,700 households subject to the benefit cap in 2021, with the final number dependant on the employment trajectories of furloughed workers leaving the Coronavirus Job Retention Scheme; the numbers of households that have to reduce earnings to below the benefit cap earnings threshold; and whether unemployment or reduced earnings continue beyond the nine-month ‘grace period’ exemption from the cap for households that were employed in the previous 12 months.

As a result, Policy in Practice recommends removing, or at least temporarily lifting, the cap so that households can benefit fully from the government’s COVID-19 social security increases -

‘The COVID-19 increases in benefit support offer many households a much-needed income boost at a time of extreme financial vulnerability. Unfortunately, the continued presence of the benefit cap means that for an increasing number of households, the effects of these measures will be limited, or never felt at all.

Removing or lifting the cap would ensure that more households in receipt of means-tested benefits would benefit from the measures introduced as a response to COVID-19. Local authorities have traditionally plugged the gaps in welfare support through DHPs, local welfare provision, and homelessness support. It is unlikely that councils could support households affected by the benefit cap if numbers were to increase substantially.’

For more information, see New analysis: benefit capped households set to double from policyinpractice.co.uk