The claim

“These figures show the benefit cap is already a success and is actively encouraging people back to work.”
Work and Pensions Secretary Iain Duncan Smith, 16 July 2012

The background:

Iain Duncan Smith has been celebrating the government’s benefits cap.

Part of the welfare reform bill, state handouts will be capped at £26,000 a year so that “no family on benefits will earn more than the average salary of a working family,” i.e. £35,000 a year before tax.

While potentially saving the state as much as £290m next year, and a further £330m the following year, he said, the Department for Work and Pensions (DWP) says the cap will “improve working incentives for those on benefits”.

Today, the work and pensions secretary was delighted to cite figures released by his department which he said were evidence that the policy is already driving people back into work.

Of 58,000 claimants sent a letter saying their benefits were to be capped, 1,700 subsequently moved into work. Another 5,000 said they wanted support to get back into work, according to the figures.

The cap doesn’t come into place until April next year, but already it’s a major success, Mr Duncan Smith claimed.

FactCheck’s taken a closer look at the DWP briefing paper to see what it really tells us.

The analysis:

The figures to which Mr Duncan Smith refers are a set of self-styled ad-hoc statistics.

Some 58,000 people were sent the letter in May and told they were earmarked for the cap because they were in receipt of more than £26,000 a year in state handouts.

The Jobcentre subsequently looked at how many of them went into work, and how many said they would like support to get back into work.

Between 4 May and 6 July, just under 3 per cent went into work, with a further 9 per cent requesting help to seek work.

But the problem is that, based on those figures alone, nothing suggests that A led to B.

We don’t know, for example, how many of the 1,700 would have moved into work anyway.

Likewise, we don’t know that those who started working did so because their benefits were going to be capped.

In order to know how effective the policy had been, we would need to know the rate at which people on benefits worth more than £26,000 went into work before the letter announcing the changes was sent, and compare it to after the letter was received.

But those figures aren’t available. The DWP doesn’t collect them. The Institute for Fiscal Studies, or the Work Foundation, both of which have researched employment, unemployment and benefits, didn’t have them either.

“[These figures do] not reveal the effect of the policy,” Robert Joyce, senior researcher at the Institute for Fiscal Studies told us.

Mr Joyce went on: “Indeed, this number is consistent with the policy having had no effect at all. Over any period, some fraction of an unemployed group will probably move into work, regardless of whether a benefits cap is about to be implemented.

“The number of people who moved into work as a result of the policy is 1,700 minus the number of people who would have moved into work anyway.

“We do not know the latter number, so we do not know the effect of the policy.”

We also asked whether the DWP could say what kind of work the 1,700 went into – whether it was full-time or part-time, whether it was permanent or temporary, and so on. While they were at it, we asked, could they say what kinds of benefits the people who started work after receiving the letter had been on?

But the DWP didn’t have any of that information either.

So FactCheck changed tack, and tried to see if we could test the DWP against its own targets.

Their impact assessment said they wanted to improve working incentives for benefits claimants. But at no stage did it explain how the policy would lead to that, for whom, or for how many.

Which leaves FactCheck none the wiser, unsatisfyingly.

Of course, we could point to last month’s figures which said that there had been a rise of 8,100 in people claiming jobseekers’ allowance compared with April.

Or we could show that the employment rate for 16 to 64-year-old’s was up by 0.3 per cent for the quarter. Similarly, we could go on to consider fluctuations in the numbers of part-time workers and full-time workers, or rates of economic inactivity, among other categories.

None of the above tells us, however, how many people who were informed they may have their benefits capped at £26,000 a year subsequently went on to find work as a result of being told as so.

The verdict:

With the information Mr Duncan Smith has put before us, his figures don’t show the benefits cap is already successful at getting people back into work.

The figures he’s pointed to show that people are getting back to work, but they don’t show it’s because of the cap.

To be fair, we can’t really say the policy’s been a failure at getting people back to work either – because we just don’t know.

A spokesman for the Department for Work and Pensions said: “The Secretary of State believes that the benefits cap is having an effect.”

By Fariha Karim

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Category: FactCheck