Housing benefit cuts considered as part of £12bn welfare savings

George Osborne
George Osborne

UK ministers are considering forcing all housing benefit recipients to contribute towards their rent as part of efforts to save billions from the welfare bill, according to reports.

Since winning the election, officials and ministers have struggled to find £12bn in savings - a key Conservative manifesto commitment.

Details of how all the savings will be made are likely to be spread between next week’s Budget and the Autumn Statement.

However, the BBC reports that government sources consider housing benefit as an obvious target as costs have risen to £25bn last year.

The average weekly housing benefit payment is £93.

If, for instance, ministers made claimants pay 10 per cent, they would have to find about £9.30 a week to ensure their rent is paid in full.

The Institute for Fiscal Studies (IFS) has calculated that this would save £2.5bn if applied to both the social and private rental sector.

Chancellor George Osborne is also understood to be pushing for the cap on all benefits to be lowered from £26,000 to £20,000 outside London and south-east England. It was previously announced the cap would be cut to £23,000 across the UK.

According to the IFS, however, reducing the cap to £20,000 would save the relatively small amount of tens of millions.

Another measure believed to be under consideration is the scrapping of part of the Employment and Support Allowance, the UK’s main sickness benefit.

A leaked government paper seen by BBC News describes the Employment and Support Allowance as a “passive” benefit which does not “incentivise” people to find a job and proposes abolishing the Work Related Activity Group (WRAG) category.

It is unclear whether any of these options will appear in next week’s Budget, but ministers have already announced plans to:

  • Cap benefit rates for the next two years
  • Reduce the benefits cap
  • Deny unemployed 18 to 21-year-olds housing benefit
  • The IFS has estimated these measures would save about £1.5bn.

    Last month, Newsnight reported that tax credits were also likely to be cut, potentially saving up to £5bn.

    It is understood that other proposals to abolish or severely restrict the carer’s allowance have been dropped after opposition from the prime minister.

    A government spokesman told the BBC it would not comment on speculation about next Wednesday’s Budget.

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