Policy background Benefit cap
The benefit cap was introduced by sections 96 and 97 of the Welfare Reform Act 2012. It was introduced with the intention of increasing incentives to work, promoting fairness between the tax and welfare systems and helping to reduce the financial deficit. Sections 96 and 97 of the Welfare Reform Act 2012 stipulate that the level of the cap should be determined with reference to estimated average weekly earnings and that the Secretary of State should review the level of the cap in each tax year to see whether its relationship with average earnings has changed. Following the review, the provisions allowed for the Secretary of State to increase or reduce the level of the cap, if he decided it was appropriate to do so.
	This Act lowers the benefit cap, so that the total amount of benefits to which workless households can be entitled to in a year will not exceed £20,000 or £13,400, except in Greater London where the cap is set at £23,000 and £15,410 respectively. The Act gives the Secretary of State the power to determine which annual limit applies to which category of claimant. It is the Government’s intention that the higher levels will apply to couples and lone parents and the lower amount to others. This Act also removes the link between the level of the cap and average earnings and the requirement for the Secretary of State to review the cap each year, replacing it with a requirement that the Secretary of State must review the cap at least once in each Parliament and allowing the Secretary of State to review it more regularly at his discretion.