Controversial welfare benefits cap approved

MPs have voted to approve the controversial capping of benefit increases over the next three years. The Welfare Benefits Up-Rating Bill, which has been given a second reading in Parliament, provides for an increase of just 1 per cent for most working-age benefits, child benefit and certain tax credit elements in 2014-15 and 2015-16, rather than being uprated in line with inflation (in addition to similar arrangements already announced for 2013-14). Carers' benefits and certain disability-related benefits will be exempt, along with pensions.

The Child Poverty Action Group says in a report that the policy will lead to an estimated real-terms cut of 4 per cent in the benefits and tax credits affected. Absolute and relative child poverty are likely to increase, they say, with serious consequences for large numbers of children, their families and for society in general. CPAG comments: 'It is hard to see how the government can square the Bill with its obligations under the Child Poverty Act 2010, or with recent statements it has made that it stands by its commitment to tackle child poverty'.

The government's own impact assessment of the Bill says the cap will hit around 30 per cent of all households. The average loss (compared with uprating in line with inflation) will be £3 per family per week, but those on the lowest incomes will be hurt most. Out of the 9.6 million households affected, 6.8 million are in the bottom half of the income distribution. Overall the measure will cut aggregate household income in cash terms by £1.9 billion by 2015.

In an indication of how politically sensitive the issue of benefits is becoming, the Conservative Party on the same day launched six posters at key London sites, attacking the Labour Party's decision to oppose the uprating cap. It invited Labour instead to join the 'fairness lobby' – arguing that because earnings for those in work are being hit by the recession, fairness requires the same treatment for those on benefits.