DWP figures reveal savings of £1.1 billion if benefits are capped at 1%

  • DWP
The DWP predict savings of over £1 billion if the 1% benefit cap is brought in Credit: Kirsty Wigglesworth/PA Wire

The Department for Work and Pensions (DWP) has calculated the savings that the exchequer could expect if the benefit cap passes this evening.

MPs will vote on a proposed 1% cap on raising benefits following today's debate in the House of Commons.

Ministers say the cap is needed because it is unfair that state handouts have been rising twice as fast as wages during recent years of austerity.

The proposed cap is expected to result in savings of £1.1 billion in cash terms in 2014/15 and £1.9 billion in 2015/16 in cash terms.

The DWP say these savings will continue in future years and gradually increase.

The cap is predicted to result in a smaller increase in household income in cash terms, compared with if benefits had been up-rated by the rate of CPI inflation, which is what has happened in previous years.

This change in household income will continue in future years.

It is estimated that around 30% of all households will be affected by the cap. The majority of working age households in receipt of some form of state support will be affected by the policy, with an average loss of £3 a week compared to CPI up-rating.

The DWP found that households towards the bottom of the income distribution are more likely to be affected and have a slightly higher average change because they are more likely to receive the affected benefits.