The new benefits cap came into force on 7 November 2016 to reduce the maximum per household by £3,000 in London and £6,000 elsewhere. How are councils expected to help those worse affected?
Expected increase in discretionary funds
Under the new system, the maximum amount a working age household can receive in benefits is £23,000 in London and £20,000 across the rest of the UK –both down from £26,000. It’s a move that's expected to impact around 88,000 households.
The Institute for Fiscal Studies (IFS) believes local authorities will take a leading role to assist struggling families, with the help of Discretionary Housing Payments (DHPs). According to the IFS, the previous cap affected approximately 20,000 households, and resulted in councils paying out around £25 million in DHPs. That figure represents around 40% of the £65 million saving brought about by the cap. The new, lower maximum will affect more than four times as many households.
Data shows just 5% of those affected by the last cap moved into work, and even fewer moved house to reduce their costs. Instead, the IFS says, some made claims under disability benefits but many more relied on DHPs. This suggests councils will bear the brunt of the shortfall.
A balancing act
Local authorities across the country may feel pressure where there was none before. The previous cap had a disproportionate impact on London, where 42% of affected households were found. This time, the London weighting means the capital is likely to host just 22% of affected households, meaning counties across the UK need to be prepared.
In addition to making greater efforts to understand and respond to the need of residents, local authorities will have to be both diligent and sensitive in their collection of other taxes and charges. Often those affected will still have council tax charges to pay, and are likely to be struggling.
Legal advice firm Nucleus argue that caps on benefits lead to more unpaid council tax bills, which means councils will need to manage the balancing act of supporting those in need and recouping tax arrears from people who can afford to pay but are simply avoiding doing so.
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