£11bn of benefits cuts 'will push many households over the edge'

An £11bn cut in Britain's welfare spend will hit struggling families and "trigger a spiral of debt, eviction and homelessness", according to the housing charity, Shelter.

While George Osborne talked of a "fair and responsible benefit system", his chief thrust was to introduce measures to control the amount of money spent on benefits, including a controversial cap on housing benefit.

"The vast majority of housing benefit claimants are either pensioners, those with disabilities, people caring for a relative or hardworking people on low incomes," pointed out Shelter's chief executive, Campbell Robb.

He said that even at current levels, nearly half of local housing allowance claimants are making up a shortfall of almost £100 a month to meet their rent. "If this support is ripped out suddenly from under their feet, it will push many households over the edge," Mr Robb warned.

Under the Chancellor's proposals, the maximum housing benefit allowance per property size will be capped; those who are expected to work will see their receipt of payments time-limited and restrictions will be introduced for those of working age in the social rented sector whose property is larger than their household size warrants.

The changes could force people out of their homes, warned Liz Peace, the chief executive of the British Property Federation. "In introducing a cap on housing expenditure, it is vital that claimants in more expensive areas of the country are not sidelined and forced out of homes they have lived in for years," she said. "This would create more problems than it would solve, as it is vital that we do not end up creating more ghettos or forcing people to travel miles to work."

Mr Osborne claimed the cuts are essential to reduce a welfare bill that has risen 45 per cent in the past 10 years – climbing £60bn. He warned that the bill will rise to £192bn by 2015 if no action is taken. His solution? As well as the cap on housing benefit, he introduced a three-year freeze on child benefit (see below for details), reduced tax credit payments to high-earning families and he will index-link benefits to the newer, inflation measure consumer prices index (CPI) instead of the older retail prices index (RPI) as it is currently.

The latter move alone will save an estimated £6bn by the end of the Parliament but it will cost the average jobseekers' allowance claimant £1 a week, according to anti-poverty charity, the Child Poverty Action Group. RPI is currently at 5.5 per cent and CPI is 3.4 per cent.

Other family benefits are also being cut. The £500 one-off Sure Start Maternity Grant – aimed at helping low-income families – will be restricted to a mother's first child only from next April. Meanwhile, the £190 Health in Pregnancy Grant – introduced last year to encourage mothers to buy healthier food – will be scrapped from January 2011.

The changes, along with the three-year freeze on child tax credits, will force more mothers to return to work quickly, said Ann Robinson, consumer policy director at uSwitch.com.

"These cuts will place family finances under even more pressure at a vulnerable time," she said. "The high cost of living coupled with the costs of running a household means that many parents today need two incomes to just get by. The decisions the Government has taken today will make it a lot harder for a mother to have the choice of staying at home."

Those claiming disability living allowance have also been targeted. The Government will introduce what it terms "objective medical assessments" from 2013-14.

This was attacked by the disability charity, Scope. "It appears to be designed purely to reduce the number of people eligible for this support," said Richard Hawkes, the chief executive of Scope.

"Disability living allowance is not a benefit, but a basic recognition that it is more expensive to live as a disabled person in our society."

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