Housing Benefits Caught In The Crossfire Of Political Infighting

Chancellor of the Exchequer, George Osborne, is targeting housing benefit to pay for a climb down over tax credit changes, according to The Sunday Times. Mr. Osborne has faced stiff resistance from both political opponents and Conservative rebels over plans to slash tax credits for millions of working families.

Under plans announced in the Summer budget, around three million working families would lose £1,300 a year in vital income. Osborne is looking to save £4.4bn from the tax credits bill, as part of a £12bn cut in overall welfare spending.

The Chancellor proposed increasing the taper rate for Universal Credit to reduce the impact of the cuts, meaning those affected would lose 75p of each pound taken home over the earnings threshold – rather than 65p. Opponents argue that the move would undermine work incentives by removing the principle that Universal Credit rewards people for moving into work or taking on more hours.

However, it was reported that Work and Pensions Secretary, Ian Duncan Smith, threatened to resign if Osborne raided the Universal Credit budget to offset his cuts. Allies of IDS say he has managed to fend off the Chancellor, who is now said to be targeting deeper cuts to housing benefit instead.

Iain Duncan Smith is reportedly looking at a social housing shared ownership scheme, in an attempt to bring down the £24.6bn housing benefit bill. Tenants living in social housing for longer than three years will be offered 70% of the equity in the home and rent the remaining 30%.

Meanwhile, Osborne is said to be bringing forward plans to increase the income personal tax allowance.

But Conservative rebel, Stephen McPartland, said: “The simple fact is that for those families on very low incomes, these changes will hurt them not help them.” Mr. McPartland also revealed figures obtained from the House of Commons Library, showing that hundreds of thousands of people claiming child tax credit would also be affected.

“The Chancellor now has to come forward with measures not only to mitigate the effects of the changes to tax credits, but to guarantee to protect families’ child tax credits”.

A government source told the Sunday Times: “Iain’s won the day. No one wants him resigning. Housing benefit is now being looked at instead.” However, they warned that less severe cuts to tax credits are still likely to go ahead. “There are still questions around universal credit but you’re not going to see anything like 75p”, they said.