An estimated 35,000 households on universal credit (UC), mostly families (77 per cent), will have their benefits capped from this month because they lost jobs or earnings to COVID-19 in March and their grace period has now expired, new analysis from Child Poverty Action Group (CPAG) finds.
CPAG says households with children will likely lose on average £62 per week as a result of being capped. These households will be the first wave of many, as households who lost earnings later in 2020 (and were unable to find re-employment) will see their grace period expire sometime in 2021. From January to March next year, CPAG expects to see a further 41,000 households hit by the benefit cap, when their grace period expires.
The benefit cap limits the total amount of benefits that non-working and low-earning households can have. UC claimants are exempt from the cap if they earn at least £604 a month (equivalent to working 16 hours a week at the 'national living wage') or if they receive some disability benefits.
The 34,000 households have been protected from being capped since March, when coronavirus struck, by a nine-month ‘grace period’ designed to give some claimants time to increase their earnings and thus avoid being capped. The grace period exempts claimants from the cap for nine months from when their earnings first fall below the threshold, if in the previous twelve months they have earned over £604 in every month. But for 34,000 households, their grace period runs out this month. They will be capped now because their earnings have fallen below the £604 monthly exemption threshold following a job loss, furlough or a cut in working hours caused by coronavirus, and their UC entitlement takes them over the cap limit.
CPAG says that in a shrinking jobs market, few could have found a replacement job or increased their working hours in the period since March 2020, so in effect they have had no chance of escaping the cap - no meaningful grace period.
CPAG is calling on the Government to suspend the benefit cap immediately to prevent more families from falling into hardship. Scrapping the cap would lift 100,000 children out of deep poverty (below 50 per cent of median income) and 150,000 out of very deep poverty (below 40 per cent of median income) at a cost of only £500 million - less than the cost of the ‘Eat Out to Help Out’ scheme.
According to a recent parliamentary answer, at August 2020 160,300 UC claimants had a grace period that started in March and will therefore end this month. Of those, CPAG estimates 35,000 will be capped from this month because their earnings have dropped below the exemption threshold and their universal credit entitlement is high enough to bring them within scope of the cap. Three in four families who have three or more children and whose grace period ends this month will be capped, CPAG estimates.
Commenting on the findings, Chief Executive of the charity Alison Garnham said: “At the end of a terrible year, there is another nasty surprise for more than thirty thousand households who have lost income to COVID-19 and who will have their benefits capped in the Christmas period and beyond it. Many more will follow in their wake as Covid-driven unemployment rises.
"These families will lose crucial social security support despite the fact that since coronavirus struck they have had no realistic prospect of earning more in order to become exempt from the cap. In effect they have had no escape route from the cap and the oncoming recession is unlikely to leave them any more room for manoeuvre.
“The benefit cap has always been irrational because it takes no account of the number of children in a household so families, especially those in areas where housing costs are high, are disproportionately affected by it. The cap is increasing child poverty and in the context of a coronavirus recession is transparently nonsensical and wrong. At a minimum it should be suspended immediately to prevent the most vulnerable families from being pulled further into poverty.”
The number of households affected by the cap has more than doubled to 170,000 since the start of the pandemic, DWP figures from last month show. Eighty-five per cent of households currently capped are families, more than half of which include a child aged five or younger. Seventeen per cent have a child under two.
* Read the briefing Capped for Christmas here
* Child Poverty Action Group https://cpag.org.uk/
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