Cllr John Moss is a Councillor in Waltham Forest and the Deputy Chairman Political in Iain Duncan Smith’s seat of Chingford and Woodford Green, which has six wards in Waltham Forest and two in Redbridge.
The Welfare Cap is a good idea. It is absolutely right there is now an upper limit on the benefits a household can be paid by the state from the taxes paid by working people. However, it is a bit crude.
There are two caps: one for households without children set at £350 per week, the other for households with children set at £500 per week.
The first does not differentiate between a single person or couple household, whilst the latter doesn’t take account of whether there are one or two adults in the household, or vary depending on the number of children.
The result is that a single person in receipt of Housing Benefit at the maximum rate for somebody renting a one bedroom flat (the rate payable in the most expensive areas of London) is unaffected, receiving £250 a week for rent plus £71 Jobseekers’ Allowance.
Similarly, a large family renting a four bedroom home somewhere where the rent is £250 per week, will also see no reduction in their benefits.
Whilst the figures for the caps relate to the circumstance of working people, broadly mirroring the average net household income for those households, they do not serve the real purpose of welfare, namely to support people adequately whilst they return to work.
We do have a system for varying the amount households receive to support their housing costs. The Local Housing Allowance sets maximum amounts payable based on the number of adults and children in a household, based on geographical location, with much lower amounts payable where rents are lower.
Why not use this as the basis of the Benefit Cap? Pay the LHA figure appropriate to the household, plus £50 for the first adult and £25 for the second, plus £15 for the first child and £10 for each subsequent child, subject to an overall maximum of £100 on top of the housing allowance.
The single person in a one bedroom flat in London would see their cap reduced to £300 which would mean a reduction of just over £21 a week in their benefits. A couple in a similar property would be £25 per week worse off, but a couple with two children would see their cap remain at £500 if they lived in an area where the highest LHA rates applied.
Crucially however, this would be reduced outside those areas by as much as £150, taking it well below the £23,000 figure the Prime Minister suggested today.
However, the amount each household received to support their living costs, after rent is paid, would remain the same irrespective of where they lived. The cap would then be more closely related to the individual household need, but there would be a lower cap for most, but a slightly higher one where, arguably, it is needed, i.e. where housing costs are the greatest.
I expect this would result in a greater saving from the total bill than the slightly lower, cruder cap as proposed, though this is of course not the purpose of the policy.