Source · Select Committees · Work and Pensions Committee
Recommendation 14
14
Rejected
Paragraph: 126
Commit to annually uprating capital limit, benefit cap, and Carer's Allowance earnings threshold.
Recommendation
Policies which reduce the level of support claimants can receive, such as the capital limit rule in means-tested benefits, the benefit cap, and the earnings threshold in Carer’s Allowance, risk reducing benefit levels if they are not regularly uprated in line with other prices. To ensure that policies designed to allocate and limit benefit entitlement operate as originally intended, the Government should commit to uprating the capital limit rule in means-tested benefits, the benefit cap and the earnings threshold in Carer’s Allowance on an annual basis.
Government Response Summary
The government effectively rejected the recommendation to annually uprate the capital limit, benefit cap, and Carer’s Allowance earnings threshold, outlining its existing review cycles and discretionary practices for each.
Paragraph Reference:
126
Government Response
Rejected
HM Government
Rejected
The benefit cap continues to provide a balanced work incentive and fairness for hard- working taxpaying households, whilst providing a safety net of support for the most vulnerable. The Secretary of State has a statutory obligation to review the benefit cap levels at least once every five years. There was a significant increase following a review in 2022, as such a review is not required until November 2027. The recent announcement of reforms that will see more people start, stay and succeed in work is a priority. And, of course, moving into or increasing employment will significantly reduce the likelihood of a household being capped. The capital limit in Universal Credit and the DWP benefits it replaces is £16,000. Capital between £6,000 and £16,000 is reduced by an assumed income. This is to protect the taxpayer and ensure resources are concentrated on those most in need whilst they are of working age. Benefit levels in the UK overnment’s response to the Committee’s Second eport 11 In Pension Credit there is no capital limit. The first £10,000 of capital is disregarded, and claims are subject to a tariff-income rule above that level. This provides some recognition of the past savings behaviours of pensioners who put money aside during their working lives to help provide for their retirement. While the Department keeps the capital limit in Universal Credit and the DWP benefits it replaces under review, there are no plans to change it. The Department recognises why the Committee would wish the limit to be raised annually, but it must strike a balance with other government priorities such as maintaining work incentives, targeting resources, and protecting the interests of the taxpayers who fund the system. With respect to full-time carers, the Committee will be aware that those on low incomes can claim Universal Credit instead of, or in addition to, Carer’s Allowance. In such cases, earnings are in practice treated according to Universal Credit rules. Currently, around 40% of Carer’s Allowance recipients are above the qualifying thresholds for Universal Credit, and for them the earnings limit in Carer’s Allowance has a practical effect. Whilst there is no legal requirement to increase this limit each year, successive governments have taken the approach of increasing it when it is warranted and affordable. In 2024/25, it was increased by 8.5% in line with the growth in average earnings. The Committee is aware that certain expenses are deductible from relevant earnings under the Carer’s Allowance legislation.