Benefit cap traps families in crowded, rat-infested homes, report finds

Low-income families affected by the benefit cap are living on as little as £4 for each person a day, often in overcrowded, rat-infested and damp homes with little prospect of escape, according to new studies.

The cap puts a ceiling on the amount a working-age family can receive in welfare support if no one in the household is working or they are on very low wages. Families affected by it in many parts of the country are, in effect, trapped in poor quality, private rented properties they cannot afford, even though these are often already the cheapest homes available in their local area, the London School of Economics studies said.

The benefit cap was introduced in 2013 by the former chancellor George Osborne alongside the bedroom tax, and – four years later – the two-child limit. He argued it would save taxpayer money while imposing behavioural change on benefit claimants.

Related: Labour has power at last. Will it use it to scrap the inhumane two-child benefit cap? | Ruth Patrick

It is now set at £25,323 in London and £22,020 outside the capital. Two-thirds of capped families are single parents, half with a child under five.

The authors of the studies conclude that it should be scrapped as it pushes families into deeper poverty, while failing to persuade them to get a job or move to cheaper housing. In effect, it forces people to use everyday living expenses to cover often exorbitant rental costs, leaving them unable to provide adequate clothing and reliant on food banks.

Capped families interviewed for the studies included a family of eight living in a three-bedroom home whose four-year-old child was having to sleep in a baby cot, and a family of five left with just £500 a month to live on after the rent was paid.

None were able to move to cheaper homes because of a shortage of affordable properties and a lack of availability of social housing. Many had to shoulder substantial rent rises despite the homes being overcrowded, cold and damp.

The Labour government has so far resisted pressure from campaigners and some of its own MPs to scrap the two-child benefit limit, and much of the political debate in recent months has been about the moral and financial impact of retaining that policy.

The studies suggest that if Labour is serious about tackling growing destitution as part of its promised strategy to tackle child poverty it must also abolish the benefit cap, which it said left families trapped at the whim of private landlords with little leverage to improve their situation because of barriers to the job market.

If the two-child limit alone were abolished some of those families affected would see no improvement in their fortunes as they would be immediately hit by the benefit cap, the papers point out.

Prof Ruth Patrick of the University of York, a co-author of the reports, said: “Any government committed to driving down child poverty and giving children better lives must get rid of the two-child limit and the benefit cap. These two policies symbolise the austerity years and should have no place in a socially just country.”

The Resolution Foundation thinktank estimated earlier this year that abolishing both the benefit cap and the two-child limit would cost the government £3bn but would leave the lowest income families an average £1,000 a year better off.

Alison Garnham, the chief executive of the Child Poverty Action Group, said: “The government’s new child poverty taskforce must make an early commitment to abolishing this cruel policy. Overnight that would reduce the depth of poverty for around 300,000 children.”

A government spokesperson said: “We have taken bold action to support lower-income families right away, by developing an ambitious strategy to reduce poverty, tackle inequality and make work pay – including first steps announced today to commit to a genuine living wage for working people.

They added: “And to deliver the biggest boost to affordable housing in a generation, we will build the next generation of new towns and legislate so we can build the homes Britain needs.”

Benefits policies – the terrible trio

Perhaps the three most notorious welfare policies masterminded by Osborne are the benefit cap, the two-child limit and the bedroom tax. Have they made a difference?

Bedroom tax

Introduced in 2013, the policy cut housing benefit support mainly for older social housing tenants in larger properties with unused bedrooms – an effort to persuade them to move to smaller properties. Currently about 476,000 tenants are affected, saving about £400m a year. Relatively few affected tenants downsized – partly through lack of suitable smaller properties – meaning they lose up to 25% of their housing benefit entitlement.

Benefit cap

Framed in 2013 as a policy that would force people on benefits to make the “same choices working families make every day” by limiting their benefit income, supposedly as an incentive to move them into work or to a cheaper home. This “nudge” approach has had little impact but saves the Treasury £300m a year. Around 100,000 households are affected, losing an average of £51 a week, trapping them in deeper poverty.

Two-child limit

The policy denies child allowances in universal credit (worth up to £3,455 a year) to third or subsequent children born after 2017. Evidence suggests it has failed in its aims to persuade families to have fewer children or do more paid work. Currently around 440,000 families and 1.6 million children are affected, saving the government £1.7bn. If scrapped, 300,000 children would be taken out of poverty.