The questions Labour needs to answer about its regional benefit cap

Why support a regional benefit cap but not regional benefit levels? And what level would the cap be set at it in London?

By George Eaton

With the introduction of the £26,000 benefit cap in four London boroughs this week (see my blog from Monday for five reasons why the cap is wrong), Labour has been challenged again to say whether it would keep the policy if elected. The party’s answer is still that it supports a cap but one that takes into account regional variations in housing costs.

Ed Balls said on LBC this morning that the party would “definitely keep” the cap, so long as it is “set in the right way”. On Question Time last night, Caroline Flint argued:

I also believe in a benefit cap but one that can work and the problem is that because there are different housing costs around the country, the government have introduced this sort of standardised benefit cap that is going to cause problems. We argued that, actually, we should have localised benefit caps that did reflect some of the housing costs

There is logic to Labour’s position. House prices in London are 61 per cent higher than the national average and, as a result, nearly half of those households affected by the cap are in the capital. As Liam Byrne argued when the policy was first proposed last year, “While all that £500 a week might get you in central London is a one-bedroom apartment, in Rotherham, Yorkshire it would get you a six-bedroom house. How can a ‘one-size-fits-all’ cap be fair to working people in both London and Rotherham?”

But the proposal invites the Conservative rejoinder: if you support a regional benefit cap, why not regional benefit levels? When Michael Howard made this point on Question Time, Flint replied: “There is a different issue when it comes to housing, if you look around the country, Michael, you can see that there are disparities in terms of housing costs.” In other words, she dodged the question. There is a strong argument against regional benefit levels (and regional public sector pay) – that they would depress local economies at a time when they desperately need stimulus – but it is one that Labour has failed to make so far.

The other question that the party needs to answer is what level the cap would be set at in London and elsewhere. While a regional approach would mean a cap below £26,000 in some areas, it would almost certainly mean a cap above this level in the capital. The political problem for Labour is that most voters already regard the existing cap as too generous. As the Telegraph’s Iain Martin tweeted this morning, “If Labour says £500 per week benefit cap in London is too low, what should it be set at instead? £700? A grand?” A higher benefit cap in the capital would inevitably prompt the accusation that poorer areas are unfairly being asked to subsidise housing costs for Londoners.

The overwhelming public support for the cap (79 per cent of people, including 71 per cent of Labour voters, back the policy) has convinced Labour that it can’t be seen to oppose the policy unconditionally. But without further development, the alternative of a regional cap risks falling apart under Tory scrutiny.