The Benefits Cap

[Billy the Fish]

The child poverty argument is complete nonsense because the way they calculate poverty in this country is nonsense. By basing all arguments on that figure is pretty much destoying the possibility of any rational debate on this subject. IMHO if you've got a roof over your head, clothes on your back and are getting fed 3 times a day then you're not in poverty. JSA, housing benefit and child benefit is easily enough to cover all that.

 

[Garage_Doors]

Will the benefits cap force more children into poverty? | Politics | guardian.co.uk


he claim

Iain Duncan Smith told Radio 4's Today programme today (audio):



We don't believe there will be an increase in child poverty because many of the assumptions being made by some of the Bishops and others is that absolutely nothing happens, in other words no one changes their circumstances. The reality is that first of all the capping at £35,000 before tax and £26,000 after actually means that we're going to work with families to make sure that they will find a way out and they will find a way out by going back to work.

We're releasing today a series of the impact assessments, those will be for public gaze later on today. Our department does not believe you can directly apportion poverty to this particular measure. We just don't believe that that is going to happen. The reality is that [at] £26,000 a year it's very difficult to believe that families will be plunged into poverty.

I'm going to look at the evidence available and ask whether this is a fair claim to make. Do you have any evidence of experience of this that might help? Get in touch below the line, email me at polly.curtis@guardian.co.uk or tweet @pollycurtis

Analysis

A report in the Observer yesterday cited a leaked government memo suggesting that 100,000 children would be pushed below the poverty line as a result of the cap. Poverty was "defined as homes where the income is below 60% of the median household income for families of a similar size". I've checked this out and while I can't reveal the sources, I'm assured that they are caste-iron. The fact that the Department for Work and Pensions acknowledged that the evidence existed, but insisted that it was not "safe" for publication, is also confirmation that the work was done even though it is now disputed.

Tim Leunig, chief economist at the liberal thinktank Centre Forum, explains the impact of the cut here using specific worse case scenarios very powerfully. He writes:

The worst hit, of course, are large families in the south-east, where rents are higher. Even in Tolworth, described by the Evening Standard as the "scrag end of Kingston borough", a four bedroom house will give you little change from £400 a week. Cutting housing benefit to £100 a week – which is broadly what the cap means if you have four children – makes life impossible. After rent, council tax and utilities, a family with four children would have 62p per person per day to live on. That is physically impossible.

Duncan Smith's argument is that these situations won't arise because people will change their behaviour – either by moving somewhere cheaper, getting a job or both.

However, Eric Pickles, the communities secretary, has warned that the cap could force 20,000 families to become homeless and that this could undermine any savings made by the cap. A leaked letter from Pickles's office last year said: "In fact we think it is likely that the policy as it stands will generate a net cost."

Duncan Smith also dismissed this saying that the definition of homelessness used in government and by the authorities was families living in inadequate accommodation with children forced to share bedrooms rather than actually being on the street. He said this was "very misleading".

Nobody will be made homelessness as a result of this. This is about fairness to the taxpayer and fairness to those were are trapped... Nobody, and I can guarantee this, no one will be made homeless in public view.


However, that does seem to be a suggestion that people will be required to live in more cramped conditions as a result of this.

Duncan Smith said that people would be helped into work by other reforms introducing the universal credit, reassessment of people with disabilities and the Work Programme. However, this relies on there being jobs available to them. This report from the Institute of Public Policy Research last week suggested across the country there are four people chasing every vacancy and in some areas of the country there is a jobseeker to vacancy rate of 20:1.

Separate independent research has identified the welfare cap as having a direct impact on child poverty. This report by the Institute for Fiscal Studies for the Family and Parenting Institute in January suggested that taken together coalition policies could tip 500,000 children into poverty by 2015, identifying 100,000 children in larger families who are particularly vulnerable to the benefit cap.

For all family types relative poverty rates fall in 2011–12 before increasing from then on. Poverty rates for larger families change by the largest magnitude over this period, presumably because these families are more highly concentrated around the poverty line, meaning that small changes in their incomes or the poverty line moves larger numbers of them into and out of poverty. Absolute poverty rates increase significantly in 2013–14 before stabilising thereafter. This increase is concentrated among households with four or more children (100,000 of the overall increase in absolute child poverty of 500,000 comes from this group despite less than 10% of children living in households with four or more children): as we can see from Table 2.3, these families see their incomes fall by the most in this year also. This is likely to be driven by the imposition of a cap on the total amount of benefits that can be received at £500 per week: as we shall see in section 3, this particularly affects large families.

There is quite extensive evidence to suggest that some children will be tipped below the poverty line as a result of the introduction of the benefits cap and that larger families and those in the south and city centres where rents are highest will be most negatively affected. Claims that any effect would be ameliorated by people changing their behaviour for example by moving house seems to be an implicit acknowledgement that people will be expected to live in cramped conditions. Claims that the "workshy" might get a job are limited in reality by the lack of jobs available.

However, the DWP is going to publish its impact assessments later today which Duncan Smith seems confident will show a different picture. I will update this blog shortly when I've had sight of those.

10.47am: The DWP has just published the impact assessment here (pdf). I'm looking at it now and will update shortly.

12.04pm: My colleague Patrick Butler who is live blogging the welfare debate through the day here has written a good summary of the main points in the impact assesssment. He writes:


The Department for Work and Pensions assumes that the policy will save up to £515m over the four years from 2013 (on best estimates)

So who will be affected? The impact assessment states:

a. Larger than average, in the most part with three or more children, and thereby receiving larger than average Child Tax Credit payments and Child Benefit payments; or b. situated in high-rent areas, and thereby receiving large Housing Benefit payments; or c. both of these factors combined.

In geographical terms the vast majority of households affected are in greater London (54%), followed by the south east (9%), and the north west (6%). It lists those local authorities where over 1,000 people will be affected by the cap. They are:

Barnet, Birmingham, Brent, Camden, City of Westminster, Croydon, Ealing, Enfield, Hackney, Hammersmith & Fulham, Haringey, Harrow, Islington, Kensington & Chelsea, Newham, Redbridge, Tower Hamlets, Wandsworth

Scotland and Wales will account for 3,000 and 2,000 families respectively, the bulk of them in the cities of Edinburgh, Glasgow and Cardiff.

How much will these 67,000 households lose? The impact assessment estimates that:

• 45% will lose up to £50 a week (in 2013-14)
• 26% will lose between £50 and £100
• 12% will lose between £100 and £150 a week
• 17% will lose more than £150 a week

So, that's more families affected than expected, the bulk of them in London and the south east where housing benefit payments are highest. Larger families - meaning families with three or more children - will be disproportionately affected.

It's clear that although we know that an estimation was made of the impact of child poverty and leaked accounts put that as high as 100,000 additional children below the poverty line, it has not been included. I've been speaking with some data experts and my collegues on the Guardian datablog to see if there is a way of modelling the effect ourselves. But it is looking very tricky.

I've also just been speaking with Sam Royston, a policy adviser at the Children's Society which has been campaigning heavily on this issue, who said:

They could have worked out the impact on child poverty but it's not in there. From this you can't work out how many would be pushed into poverty because they have not given the breakdown of family size and income in details. This is obviously going to have an impact on children, I would suggest child poverty was an important part of the impact assessment and it has not been done.

They have revised upwards the number of households affected from 50,000 to 67,000; the number of children have been revised up from 210,000 to 220,000. The key thing is that the main impact of this is on children, not on adults. For a policy targeted at non working adults to impact on children seems like a very badly targeted policy. Child benefit is paid for children's needs, not the parents' needs. It is extremely important to remove that form the cap. Even after it's removed from higher rate taxpayers a household could get upward of £80,000 and still get child benefit. By comparison this is saying that those on benefits would lose child benefit.

The £275m savings as a proportion of the £192bn spent on welfare payments in 2010 is tiny. It's 0.1% of the welfare bill. Reducing child benefit would reduce the savings by 100m 0.05% of the budget. This is a tiny amendment. This is not deficit reduction plan destroying.

1.11pm: I've just been speaking with Robert Joyce at the Institute for Fiscal Studies who carries out independent analysis of the impacts of government's tax and welfare reforms. I wondered whether he could help us model the impact of the new benefit cap on the number of children in poverty. He said that he couldn't and that he believed that the government's claim that the assessment of the impact was "not safe" was fair:

The data that's used to estimate the effects of welfare changes is basically a sample of households. Roughly speaking each household we have data on represents about 1000 households in the population. If they think 67,000 households are affected we would only have a sample of a few dozen households in the data to work with. So it's difficult to say anything robust based on that.

Joyce confirmed that it was extremely likely that some households that were above the poverty line would move below it as a result of these changes but he gives quite compelling - and slightly disturbing - reason as to why that might not actually be a huge number.

Out of 67,000 it seems very likely that some are above the poverty line and some will move below it. My gut feeling is that it might not have large impacts on headline numbers. A lot of people who are receiving benefits may well already be in poverty. If they have a lot of children once you've adjusted income for family size despite the fact that they receive more than £500 a week it's perfectly possible they were already in poverty. This will just push them further.

It would be a small impact relative to changes in poverty that you might ordinarily see from year to year and relative to the changes you will see from the broader reforms. This will almost certainly be small compared to what else is going on. We've forecasted poverty up to 2015. From 2013 onwards we estimated that the combined effect of all of the coalition government's reforms would be to increase child poverty by 300,000 children.

He also described the cap as "arbitrary".

What they are doing from an economic point of view doesn't quite make sense. If they are really worried about particular families receiving huge amount of benefit it comes down to either a small number with a lot of children or people with particularly high housing costs. If that's what they are worried about then it would make more sense to target those issues more generally rather than applying essentially an arbitrary cap. It's not obvious to me that the maximum should be related to average earnings. From an economic point of view it is very arbitrary. If you choose to apply an arbitrary number as a cap on benefits then you are applying the same cap to families in very different circumstances. You are not accounting for the very large differences in circumstances across households.

1.37pm: Daniel Boffey, the Observer's policy editor who has been closely following this debate, has just emailed me this summary of where he believes the debate has now got to:

The argument has basically come down to those who want the cap to be based on average earnings (the government) and those who want it based on income (the Bishops). If you base it on average earnings you ignore that the average family earning £26,000 a year also receives child benefit for each of their children. The government's proposed cap ignores how many children are in a family. It is irrelevant. The Bishops say the size of a family should not be irrelevant in welfare decisions. They believe a humane state should take the size of a family into account and look to protect children in large families, for example where people have taken on the children of others, for whatever reason.

3.13pm: Below the line, the comments are dominated by a debate about whether £26,000 is a reasonable income. I thought the figure needs a little context. It is very roughly equivalent to average household England, but how does it compare with the poverty thresholds? The headline measure for child poverty is a household with an income that is 60% of the median household income. But this is equivalised for family size. The following are the different thresholds for different types of households, provided by Child Poverty Action Group from the official figures. These show that in fact a family with five children can have an income well in excess of £30,000 and still be classed as in poverty.

Appreciate the effort in typing all that, but i will get bored reading all that sorry.

 

[Garage_Doors]

The child poverty argument is complete nonsense because the way they calculate poverty in this country is nonsense. By basing all arguments on that figure is pretty much destoying the possibility of any rational debate on this subject. IMHO if you've got a roof over your head, clothes on your back and are getting fed 3 times a day then you're not in poverty. JSA, housing benefit and child benefit is easily enough to cover all that.

Very much this.

 

[DanielT]

Disappointment in south london as palace fans thought they were getting free headwear

 

[Freddie Goodwin.]

Poverty now is not having an ipad, huge TV and nice furniture.

Maybe I'm bitter because I'm from a family of 10 and my old man worked all his life to bring us up, with Mum at home. If i only it was in the present he would not have had to work and we would have had a fine house, holidays and the rest.

Too many people now just want to take, take, take. And I'm not having a pop at those seeking work because I've had my times out of work and I remember how tough that was too.