The Spending Plan policy 6: reduce the welfare cap to £20,000

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April 13, 2015 4:32 PM

Each day we are publishing a blog on one of the policies from our Spending Plan. Click here to read the previous policy.

Analysis of the coalition government’s £26,000 benefit cap showed that it led to increased employment levels in affected households. It is also by far the most popular of the coalition’s policies. To continue this progress the government should go further and reduce the benefit cap to £20,000.

A limit of £20,000 is still significantly above the national minimum wage which is around £13,000 for an adult over 21 working full time. It is significantly closer to national average post-tax pay, whereas the £26,000 cap is equivalent to a pre-tax income of over £34,000 in this tax year (2015-16). The government was right to argue that being on benefits should not pay more than average wages. That’s why they should reduce the cap so that it's not higher than the level of post-tax income for someone in work.

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