FactCheck: The truth about the child benefits cap
The welfare state is set to continue shrinking under the coalition, with George Osborne asking for a further £10bn from the welfare bill by 2017, over and above the £18bn that has already been cut.
So what’s next for the axe?
Iain Duncan Smith suggested in a BBC interview that families with more than two children will no longer be able to expect extra benefits for each child they bring into the world.
The Work and Pensions Secretary said this was a matter of “principles and fairness”, not just saving money, although he insisted there were “significant amounts of money” at stake.
The Joseph Rowntree Foundation responded by saying: “The suggestion or implication that the welfare system is encouraging poorer families to have more children is not borne out by the evidence.”
Number 10 immediately stressed that Mr Duncan Smith was “posing questions” rather than announcing a definite new policy.
In a similar vein, but less politely, a Lib Dem source called it “Tory kite-flying”, adding: “The Liberal Democrats have not signed up to it and it is absolutely not Government policy.”
It follows that there is no official impact assessment that tells us how much money would be saved by implementing this idea.
Even getting hold of the numbers on large families claiming benefits is tricky.
In an answer to a Freedom of Information request last month, the Department of Work and Pensions released these figures:
In May 2011 there were 1,354,280 families who had one or more children and claimed at least one out of work benefit. The vast majority – 77 per cent – had one or two children.
Some 14 per cent had three children, 6 per cent had four and 2 per cent had five.
After that the percentages get so small as to be fairly negligible, although the raw numbers are not as small as you might think.
Only 3 per cent of families on out-of-work benefits have five or more children, for example – but that’s still nearly 40,000 families.
Mr Duncan Smith talked about paying out benefits for the first two kids only, so we could be talking about 310,000 families affected – 23 per cent.
How much of a saving would that be? It’s almost impossible to say for sure, as the main benefits that would be affected are child benefit, and various tax credits which change according to whether more than one parent is unemployed.
Without knowing the circumstances of the families involved, we can’t put a figure on the likely saving, although insiders say the impact will probably be far less than existing changes to housing benefit.
Picking up the housing bill for unemployed families living in big properties is what costs the state the big money.
But the days of the £100,000-a-year payouts ought to be a thing of the past now after the £400 a week (£20,8000 a year) maximum cap on housing benefit that came in at the start of this year.
Not that many families were ever getting £100,000 a year. DWP figures show that some 160 claimants out of more than 3 million were getting the equivalent of £50,000 a year or more in 2010. That’s 0.0004 per cent of cases.
Our best guess on how many of these claim topped £100,000 is a handful. The Daily Telegraph researched this in 2010 and found only three, all in the London borough of Westminster.
In fairness to Mr Duncan Smith, cases of payouts over £50,000 increased from 2008 to 2010, going from 20 cases to 160. That’s a dramatic increase in percentage terms, though the actual numbers are low.
As far as his assertion that families at the very top and bottom of the income scale have the most children, nothing has so far been forthcoming from his department to confirm this.
The best DWP figures we can find on the subject show that there is a trend towards lower-income families having three or more children, although the second-lowest income bracket are slightly more prolific than the very poorest.
(The columns are income quintiles from lowest to highest, left to right)
We can’t see how many of these people are on benefits or what happens with the very largest families or the very richest people.
These figures also show that the proportion of all UK families who have three or more children fell from 33 per cent in 2001 to 25 per cent in 2011. So big families are getting less common.
And children who live in workless families fell from 19 to 17 per cent in the same period.
Mr Duncan Smith doesn’t know how much money this idea will save, and we can’t fill in the blank for him, although the sums are likely to be fairly modest in comparison with the housing benefit cap that has already been agreed.
On the housing benefit claim, it’s perfectly true that the government did end up paying out more than £100,000 to the biggest households, but it ought to be said that the number of cases was tiny.
The number of families claiming unemployment benefit who have lots of children (five or more) is similarly small as a percentage, although the numbers stretch into the tens of thousands.
That in itself of course does not prove that benefits encourage people to have more and more children irresponsibly: we don’t know from these figures how many claimants had big families while working then had to go on benefits after losing a job.
By Patrick Worrall