One of the key elements of the Full Employment and Welfare Benefits Bill announced in the Queen’s Speech is the government’s plan to reduce the current household benefit cap of £26,000 to £23,000. In a sign of where the welfare debate now stands, Harriet Harman stated that Labour was ‘sympathetic’ to this reduction. We have reached the point where there is apparent political consensus that those with the narrowest shoulders should now bear the greatest burden.

Originally introduced to ensure no out-of-work household received more in welfare payments than the amount earned by the median working household, a further 11 per cent cut means the gap between those households will widen even further.  And as we have previously said, headlines on the effectiveness of the first cap in inducing ‘movement into work’ actually mask its true effects for the vast majority of people.

But our tax and transfers system is important for reasons beyond ‘incentivising’ work. In many cases it provides an important counter-balance to extremely low wages paid to those already in work. A major report last week revealed that the UK is the European capital of wage inequality, with a pay divide so great that we even manage to skew the figures for the entire EU. Given such distorted market inequality, our tax and transfers system is all the more vital for mitigating the effects of that divide. While it is more regressive in parts than people admit, it is particularly helpful in alleviating poverty for households reliant on part-time, temporary and self-employed work. More importantly, it is a worthwhile mechanism providing social solidarity whereby we support each other at different stages of our lives according to need.

This is part of a more general problem, that politicians’ efforts and rhetoric are focused almost entirely on voters and (hard) workers.  We elect MPs for whole constituencies and so should reasonably expect them to represent the entire population within those borders, regardless of age, income or work status. The warning that children are seven times more likely to lose out from the welfare cap’s effects than adults is a stark reminder that policy doesn’t just affect those paying tax or casting votes.

Material differences create social distances and excessively high levels of inequality tend to erode this necessary sense of fellow feeling and social solidarity. This can be seen in the fact that many of the people actually setting policy don’t seem to know anybody in the situations their policies seek to address.

A further-reduced benefits cap hurts those already under pressure and lets our welfare system succumb to dangerous stereotypes. Iain Duncan Smith wrote in the Telegraph that the cap was introduced to ‘put a stop to sky-high benefit pay-outs’. What’s actually sky-high is UK inequality and that’s what needs to be tackled – urgently. 

Lucy Shaddock, Policy and Campaigns Officer