No 10 warned on benefits cap plan

3 July 2011 Last updated at 01:28 GMT The letter was sent from the office of Communities Secretary Eric Pickles A government department warned Downing Street that plans to cap benefits could result in 20,000 people in the UK being made homeless, it has emerged.

A letter from the office of Communities Secretary Eric Pickles in January said this meant the proposed ?500-a-week cap could cost more than it saved.

The letter - leaked to the Observer - also said other housing benefit changes could make 20,000 more people homeless.

Mr Pickles' spokesman said he fully supported government benefits policies.

'Serious issues'

And a Whitehall source told the BBC that Mr Pickles had not written the letter himself and had never raised the issues with cabinet colleagues.

Continue reading the main story Gary O'Donoghue Political correspondent, BBC News

The fact that this document is six months old gives the government significant protection when charges of splits over the policy are levelled.

Sources say that Eric Pickles is completely behind the policy and supports the way it's being implemented. The difficulty is that senior civil servants don't go freelancing on policy, particularly when setting out the department's view to Downing Street.

Indeed, the note itself explicitly suggests Mr Pickles was planning to raise these issues in a meeting on council tax benefit. The sources insist he never raised the issues in cabinet or in any cabinet committee.

So it seems we're left with a document setting out major worries about the policy and a secretary of state who's completely relaxed about it.

A couple of possibilities spring to mind: first that Mr Pickles is completely at odds with his private secretary over the matter; or second, and more likely, that he's been argued round over the course of six months.

The letter said the Department for Communities and Local Government supported the principle of the benefits cap "on the grounds of fairness" because it was "not right that a household on benefit should receive more than the average working household".

But it said the cap could cause some "very serious practical issues" because thousands of families would be unable to pay their rent.

"Our modelling indicates that we could see an additional 20,000 homelessness acceptances as a result of the total benefit cap," it said.

"This on top of the of the 20,000 additional acceptances already anticipated as a result of other changes to housing benefit."

It outlined concerns that an estimated ?270m a year in savings from the measure did not take into account the additional costs to local authorities through homelessness and temporary accommodation.

"In fact we think it is likely that the policy as it stands will generate a net cost," the letter stated.

Continue reading the main story

Clearly action is needed to tackle the housing benefit bill which has spiralled to ?21bn a year under Labour”

End Quote Eric Pickles' spokesman And it said the department was worried about the impact of the policy on its ability to build social housing for families.

"To fund new affordable housing development providers need to be able to charge rents of up to 80% of the market levels but the impact of the overall benefit cap will prevent them from doing so in many areas greatly reducing their financial capacity," it said.

"Initial analysis suggests that of the 56,000 new affordable rent units up to 23,000 could be lost."

On a suggestion that families might be required to divert part of their non-housing benefit to cover housing costs, the letter said: "It is important not to underestimate the level of controversy that this would generate and the difficulty of justifying this in policy terms as well as implementation."

The letter proposes removing child benefit from the overall benefits cap as a way of "reducing the negative impacts".

Urgent question

The letter was written by Mr Pickles' private secretary Nico Heslop and sent to Prime Minister David Cameron's private secretary Matthew Style.

A spokesman for Mr Pickles said: "We are fully supportive of all the government's policies on benefits. Clearly action is needed to tackle the housing benefit bill which has spiralled to ?21bn a year under Labour."

Labour have said they will put down an urgent question on the issue in Parliament on Monday morning.

Plans for a maximum limit on the amount of benefits one family can claim from 2013 were announced at the Conservative conference last October.

Chancellor George Osborne said the cap would be set at the amount "the average family gets for going out to work" which is about ?26,000 a year.

The cap would apply to the combined income from benefits such as jobseekers allowance, housing benefit and council tax benefit.

About 50,000 families are expected to be affected and likely to lose an average of ?93 a week each.

Housing benefit in its current form was introduced in the early 1980s, but it has been modified several times by subsequent governments. Over the years the cost has increased. The coalition says the housing benefit bill was ?11.2bn in 1997/98 but will be ?24.7bn by 2014/15 without reforms. The government is making 10 changes to housing benefit, including local housing allowance (LHA), which is paid to those in privately-rented accommodation. Eight of the changes result in savings and two involve new costs. Overall, the measures will cut ?2.4bn from the housing benefit bill. This change will restrict housing benefit for working-age tenants who are occupying a larger social rented property than required, such as a couple in a three-bedroom house (size restrictions already apply to private sector tenants). The measure results in the biggest saving of all the changes. Introduced: April 2013 This change will mean that local housing allowance (LHA) rates will be calculated on the 30th percentile of local rents rather than the mid point. This means LHA tenants will have, in theory, access to the bottom 30% of the market instead of the bottom 50%. Introduced: April 2011 At present, if you are a local housing allowance (LHA) claimant in a property where the rent is cheaper than the average, you can keep the difference, up to ?15 a week. The withdrawal of this payment was first announced by the Labour government in 2009. They deferred it until April 2011. Introduced: April 2011 LHA will be set in line with the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI). CPI and RPI are both measures of inflation, but while RPI includes housing costs and mortgage interest payments, CPI does not. A switch to CPI is expected to lead to lower benefits. Introduced: April 2013 Household welfare payments will be capped at ?500 per week in 2013. The limit would not apply to people on disability living allowance, war widows' pensions and working tax credit. It will see those affected lose an average ?93 a week - the biggest loss of any other change. Introduced: April 2013 Single people under the age of 25 receiving local housing allowance are restricted to the rate for a single room in a shared house, rather than for a one-bedroom property. The restriction to this lower rate will be extended to those up to the age of 35. Introduced: Jan 2012 Deductions can be made from the benefit claimants receive if they share their home with adults not dependent on them, such as adult children. The deductions - from ?7.40 to ?47 a week - are made as it is assumed the individuals pay towards the rent. These deductions will be increased. Introduced: April 2011 The government plans to remove the five-bedroom local housing allowance (LHA) rate so the maximum will be for a four-bedroom property. It will also introduce caps on LHA weekly rates. The Chartered Institute of Housing predicts within 30 years, all areas of Britain will be affected. Introduced: April 2011 More money is already being made available to offset the impact of the cuts to housing benefit. However, the Chartered Institute of Housing says this equates to less than 2.5% of the total package of housing benefit cuts, or about ?8.30 per year per case. Introduced: Oct 2010 The government says, in recognition of the important work done by carers, it will provide extra money to help fund an additional room for them. The National Housing Federation welcomes the move but adds that wider benefit reforms will have a negative impact on disabled people's income. Introduced: April 2011BACK {current} of {total} NEXT

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