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IFS questions reduced benefit cap 'trivial' savings

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A likely increase in the number of households calling on councils’ discretionary housing payments to cope with the reduced benefit cap, which comes into force today, make the government’s estimated savings from the policy “all the more trivial”, according to the Institute for Fiscal Studies.

In 2015-16 £25m of the national £125m discretionary housing payment fund pot was allocated specifically to help tenants affected by the benefit cap.

The IFS said that offset almost 40% of the £65m saving made nationally last financial year directly as a result of the £26,000 benefit cap.

From today the cap reduces to £23,000 a year in London and £20,000 elsewhere, with the government projectings savings of about £100m a year in the long-run.

The IFS said: “These discretionary housing payments look likely to play a key role in mitigating the impact of the cuts on some of the families affected - whilst rendering the net fiscal savings from the cap all the more trivial.”

The reduced benefit cap is anticipated to change the profile of households affected, as well as the geography with the policy becoming “significantly more important in many regions outside of London”, said the IFS.

The institute called on the government to “set out a clear vision of which families it thinks receive excessive amounts of benefits and why” as it said there was “a risk of arbitrariness” in the effects of the policy, especially if it makes further changes to the level of the cap in the future.

Last week the Chartered Institute of Housing warned the reduced benefit cap was at risk of increasing homelessness across the country.

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