Q&A: The benefits cap and you

Jobcentre Jobseeker's Allowance is among the benefits that count towards the cap

The government says that households claiming benefits should be no better off than the average family in work.

The result is the benefits cap, which was introduced across England, Scotland and Wales over the summer of 2013. It limits how much any one household can receive in state benefits.

This is one of a series of changes to the benefits system, in a major overhaul that affects millions of people.

More recently, Parliament agreed to a more wide-ranging cap on welfare spending as a whole.

This has been set at £119.5bn for 2015-16, the first year it will take effect. This figure excludes the state pension and some unemployment benefits.

If the government exceeds this level of welfare spending, then the chancellor must explain the situation to Parliament and a vote must be held to endorse the additional spending.

line break
Coins and notes
What is the benefits cap?

This affects individuals directly.

Under the policy, couples with or without children, or lone parents with a child, can claim £500 a week in benefits. Single adults can claim no more than £350 a week.

In comparison, the average UK salary of £27,000 works out at about £400 take-home pay a week.

line break
Which benefits count towards the cap?

Bereavement Allowance, Carer's Allowance, Child Benefit, Child Tax Credit, Employment and Support Allowance (except where paid with the support component), Guardian's Allowance, Housing Benefit, Incapacity Benefit, Income Support, Jobseeker's Allowance, Maternity Allowance, Severe Disablement Allowance, Widowed Parent's Allowance, Widowed Mother's Allowance and Widow's Pension (including the age-related component).

line break
Which benefits does that leave that do not count towards the cap?

Bereavement Payment, Council Tax Benefit (or its replacement), Discretionary Housing payments, Social Fund payments (including cold weather payments), Pension Credit, Residency Order payments, Adoption Pay, Maternity and Paternity Pay, Statutory Sick Pay and Winter Fuel Payment.

line break
Pensioners
Some people are exempt from the cap, who are they?

No pensioners are subject to the benefits cap, as it only affects people of working age.

No-one who works enough hours to claim Working Tax Credit is affected.

The cap will also not apply in any household where the claimant, the partner or a child receives any of the following benefits: Disability Living Allowance or Personal Independence Payments, Attendance Allowance, the support component of Employment and Support Allowance, Industrial Injuries Benefits (including war disablement pensions), War Widows' and War Widowers' pensions.

line break
How is the money taken back if an individual's benefits exceed the cap?

Individuals in this situation lose some of their Housing Benefit, which is paid to help people with their rent.

The government says this is "returning fairness" to the benefits system. Labour backed the idea of a cap, but has suggested the idea of setting it at different levels in different parts of the country.

The government has made some money available through local authorities, designed to help individuals with extra costs, such as moving home.

line break
Woman in wheelchair
How is the welfare cap different?

The benefits cap is a limit on the amount paid to individuals.

The welfare cap is a limit on benefits spending overall.

Again, the idea was supported by Labour.

In March, MPs agreed a welfare cap of £119.5bn in 2015-16, excluding the state pension and some unemployment benefits.

line break
Is that figure achievable?

The government says there is no chance that this limit will be breached.

However, internal government memos seen by the BBC suggest the costs of Employment and Support Allowance (ESA) - the main, new sickness benefit - are rising and few cost-cutting options are available.

As a result, there is a risk, the documents say, of the welfare cap being breached, although a Department for Work and Pensions (DWP) spokesman said the projections were "spurious scenarios" based on no action being taken.

More Business stories

RSS

BBC Business Live

  1.  
    08:45: Fait accompli?

    A publishing glitch on Microsoft's blog appears to have accidentally revealed that the tech giant is buying up an email start-up called Acompli. An empty post was published on the site, but the URL was the giveaway - it contained the words "microsoft-acquires-acompli".

     
  2.  
    Via Twitter Jonah Hull, senior correspondent, Al Jazeera English
    Jonah Hull

    tweets: "#OPEC breakfast. This is what you get when the oil price falls below $80."

     
  3.  
    08:30: Vinyl record
    Vinyl

    More than one million vinyl records have been sold in the UK so far this year - the first time the milestone has been achieved since 1996, reports the BBC's Dave Lee. The Official Chart Company says it will soon launch a weekly vinyl chart.

     
  4.  
    08:22: Markets update

    Here's how the main European markets are looking in early trading:

    • In London, the FTSE 100 is down 0.1% at 6,721
    • In Frankfurt, the Dax is up 0.25% at 9,940
    • In Paris, the Cac is down 0.2% at 4,373
     
  5.  
    Via Twitter Adam Parsons Business Correspondent

    tweets: "Poundland shares up 3%. Company now valued at £800m."

     
  6.  
    08:12: East Coast sale BBC Radio 4

    "This was the best of the three bids," Transport Secretary Patrick McLoughlin tells the Today programme. He adds the Stagecoach/Virgin consortium known as ICR, is offering an increase in the premium that will be paid to the government. Asked if the consortium will paying more than the other bidders he replies "Oh yes". But he says services will also be improved - 23 more rail services will operate from Kings Cross. "We have seen a magnificent transformation on the railways in this country since privatisation."

     
  7.  
    08:05: Stagecoach shares

    Shares in Stagecoach are up more than 8% following the announcement that it won the East Coast rail franchise. Meanwhile, rivals FirstGroup are down 5.6%.

     
  8.  
    07:50: Poundland profits

    Discount retailer Poundland has reported a near 12% rise in pre-tax profits for the six months to the end of September - to £9.3m. The retail chain, which debuted on the London Stock Exchange in March, said its target was to open 60 new stores in the UK and Ireland next year. It added it was on track to open 10 stores in Spain by the end of 2016, with three already open.

     
  9.  
    07:46: East Coast sale
    Mick Cash

    The RMT trade union has come out all guns blazing. "It is a national disgrace and an act of utter betrayal that the government has confirmed that it is bulldozing ahead with the re-privatisation of the East Coast Main Line despite all the figures showing that the current public sector operator is handing over a billion pounds back to the British people while delivering huge improvements in service and customer satisfaction," says general secretary Mick Cash.

     
  10.  
    07:28: Mulberry finally bags new creative director
    A woman walks past a video display in the shop window of a Mulberry store in central London

    Luxury handbag maker Mulberry has finally completed its search for a new creative director. It comes 18 months after Emma Hill, the woman who helped make Mulberry a household name, departed following a row with the firm's then chief executive Bruno Guillon over "creative differences". Mr Guillon left in March after Mulberry issued three profit warnings. The new creative director is Johnny Coca, currently head of design direction at Céline. He joins Mulberry in July 2015.

     
  11.  
    07:24: East Coast sale

    ICR, as the consortium is being dubbed, is not an even partnership between Stagecoach and Virgin. The former holds 90% of the capital.

     
  12.  
    07:16: East Coast sale

    Inter City Railways says: "The company will shortly begin talks with Network Rail and the Office of Rail Regulation to agree its plans to run new direct services from London to Sunderland, Middlesbrough and Huddersfield".

     
  13.  
    07:12: East Coast sale

    "Over the next eight years Inter City Railways will pay the government around £3.3bn to operate the franchise."

     
  14.  
    07:10: East Coast sale

    Inter City Railways, as the Stagecoach/Virgin consortium is named, says the deal will bring 23 new services from London to key destinations, and 3,100 extra seats for the morning peak times by 2020.

     
  15.  
    07:00: East Coast sale

    A consortium made up of Stagecoach and Virgin has won the franchise to run the East Coast main line.

    East Coast
     
  16.  
    06:54: Rémy Cointreau
    Rémy Cointreau

    Cognac maker Rémy Cointreau reports a 15% drop in operating half-year profit, to €102m. The French group says it "remained adversely affected by evolving consumption patterns in China," by which it means that officials are having fewer Cognac-fuelled soirées.

     
  17.  
    06:50: Falling oil prices BBC Radio 4

    Speaking of balancing budgets, a number of analysts think Opec won't be able to reach an agreement on cutting oil production (which is needed to stop the supply surplus that is driving the oil price down) precisely because of a number of members have already done so - Iran has cut production by 1 million barrels a day as a result of international sanctions. Moreover, some members, such as Venezuela and Nigeria, simply can't afford to do so.

     
  18.  
    06:40: Tibetan tapestry
    Silk

    The latest entry in our Live Page series of artwork sold for exorbitant amounts is this 600-year-old Tibetan silk tapestry. It fetched $45m at an auction in Hong Kong - a record for art from the region. The good news is that the buyer will put the colourful thangka - which depicts the meditational deity Raktayamari, and was created during the Ming dynasty between 1402 and 1424 - on public display at a museum in Shanghai.

     
  19.  
    06:24: Falling oil prices
    Opec

    Here's an image that the delegates at Opec will be familiar with. It outlines the price per barrel of Brent crude oil that some states need to see in order to balance their budgets.

     
  20.  
    06:24: Falling oil price BBC Radio 4

    The main item on the agenda at the Opec meeting is the falling oil price, and what to do about it. BBC economics correspondent Andrew Walker says lower demand has pushed the price down, caused by a slowdown in industrial production in the eurozone and China. But US oil production - thanks to fracking - is also at its highest since 1986 and that is putting pressure on the price of Brent crude as well.

     
  21.  
    06:20: What is Opec?
    Opec

    The Organization of the Petroleum Exporting Countries (Opec) is holding talks in Vienna later today, on how to address the 30% fall in crude oil prices since June. Our colleagues have put together a 60-second explainer that will tell you what the meeting is all about.

     
  22.  
    06:10: Thomas Cook Radio 5 live

    Anne Richards, chief investment officer at Aberdeen Asset Management, tells Wake Up to Money that Harriet Green's shock departure from Thomas Cook yesterday doesn't feel "pre-ordained", and as a large shareholder, her company will be asking for an explanation. Thomas Cook's share price slumped 17% following the news.

     
  23.  
    06:02: Matthew West Business Reporter

    Morning. We should also be getting details of who the East Coast Mainline is being sold to this morning too. According to the Mirror newspaper, the government has decided upon a French consortium which includes Kelios - ultimately owned by French state rail operator SNCF. Will bring you that announcement when it happens. As always get in touch via email at bizlivepage@bbc.co.uk or on Twitter @bbcbusiness.

     
  24.  
    06:00: Joe Miller Business Reporter

    Good morning. A cross-party report is understood to have recommended giving the Scottish Parliament new powers to set income tax and control some welfare payments. The report was commissioned after David Cameron, Ed Miliband and Nick Clegg promised shortly before the independence referendum that Holyrood would be given new powers, if people voted to stay in the UK. Stay tuned for more details.

     

Features

  • photo of patient zero, two year-old Emile OuamounoPatient zero

    Tracking first Ebola victim and and how virus spread


  • A young Chinese girl looks at an image of BarbieBarbie's battle

    Can the doll make it in China at the second attempt?


  • Prosperi in the 1994 MdSLost in the desert

    How I drank urine and bat blood to survive in the Sahara


  • Afghan interpetersBlacklisted

    The Afghan interpreters left by the US to the mercy of the Taliban


BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.