Benefit cap is to be double that of London

Employment & Social Security (ESS) wants to increase the income support benefit limitation from £750 to £850 per week. That would move it from £39,000 to £44,200 a year.

In London, the benefit cap sits at £442.31 per week (£23,000 a year), and outside London £384.62 per week (£20,000 a year).

The move to £44,200 a year will put the cap on income support well above the average earnings of workers in Guernsey. In March 2019, the median annual earnings per worker for the whole island was £33,530.

In the UK there were concerns over the benefit cap when it reached £500 per week as it was being abused. That led to the current reduction to get people back into work.

In Guernsey, the hike in the benefit cap is partly due to the costly amalgamation of the former supplementary benefit system and rent rebate scheme into income support.

Social housing tenants are now charged the full standard weekly rent and therefore require more income to meet their needs.

That move has put more families on income support – the old supplementary benefit – and taken away the hope of many housing tenants ever getting into private sector housing and out of States housing. Another 929 tenants were placed on income support, costing the taxpayer an additional £4 million a year.

Under the old system, a family living in social housing would not have been affected by the benefits cap as the heavily discounted rent did not count as a benefit. Now, by having to pay actual rent for housing, many families drop into the poverty trap. Before the system change, 12 families and 56 children were affected only. But with the change to income support many more families fell below the poverty line. This year another 130 families and still more are in poverty. All because of the change to income support.

This change has cost the taxpayer not only £4 million a year, but added amounts to bail out families thrown into poverty. That was £330,000 last year and the anticipated additional cost of the committee’s proposal this year is approximately £275,000.

In total, the cost of income support has jumped from £30.8 million before the system change in 2018 to £42.8 million in the budget for 2020.

In the UK, the government has struggled with the tight work situation and the benefits trap. They reduced the benefits cap to get people off benefits and into work.

In Guernsey, the whole benefit system appears to be going the other way. Instead of working to wean people off benefits, social security is working to put more people on income support at increasing social cost to the taxpayer.

DEPUTY DAVID DE LISLE

Address withheld.

Editor’s footnote: Deputy Michelle Le Clerc, president of the Committee for Employment & Social Security, replies:

Your correspondent says that the cost of income support has jumped from £30.8 million before the system change in 2018 to £42.8 million in the budget for 2020. Those figures are correct on the expenditure side, but there is no account of the income side where social housing rental income increases from £11.6 million in 2018 to £18.8 million in 2020. This reduces the overall difference between the old and new systems to £4.8 million, which is in line with the original estimates for an income support scheme which would reduce levels of poverty in Guernsey and Alderney.

Comparing the UK benefit cap and the Guernsey benefit limitation is not very helpful without an explanation of key differences.

The UK cap does not apply to working families who, depending on their circumstances and rent, can have income and benefits well above the £850 per week benefit limitation recommended for Guernsey. The UK cap also does not apply to families including a person receiving disability benefits, nor does it apply to pensioners.

Comparing the benefit limitation to median earnings is also not particularly relevant. As the benefit limitation, by its nature, impacts on families, a more meaningful comparison would be median family income, which in 2016 (the last published data) was £79,592 a year gross for two adults and one or more children.