Ministers look for housing benefit cuts

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A CRACK-DOWN on the pounds 7bn housing benefit bill is being prepared by Peter Lilley, the Secretary of State for Social Security, as part of the Treasury's search for ways to curb the pounds 50bn budget deficit.

Ministerial advisers have told the Independent three options for cutting housing benefits are circulating in Whitehall: penalising local authorities who fail to tackle fraud; lowering the earnings limit below which people can claim benefit; and lowering the pounds 16,000 ceiling on allowed savings.

Cutting fraud and abuses would have widespread support among Tory MPs after reports of foreigners claiming housing benefit for West End luxury flats with rents of pounds 2,000 a month. 'When Peter Lilley talks about stopping fraud in social security payments, he is talking principally about housing benefit,' said the source.

John Major ordered action to tackle abuses after being handed a dossier by John Butterfill, the Tory MP for Bournemouth West, on the growth of social security hostels which earned the resort the title 'Costa del Dole'.

Mr Butterfill found one developer with 72 properties was advertising his flats on Merseyside, seeking tenants for whom housing benefit would be available in Bournemouth. 'It is a scandal people can build business empires on the back of the benefit system,' the MP said last night.

Michael Portillo, Chief Secretary to the Treasury, who has faced calls by right-wing Tory MPs to cut spending rather than raise taxes, said yesterday that he believed the state was too big and needed cutting back. After ordering fundamental reviews of health, the Home Office, education and social security, he is widening the net to housing, agriculture, inner cities, courts, and the Treasury itself.

Lowering the ceiling for savings for those eligible to claim housing benefit would cause a storm of protest as it would affect mainly the elderly. After the humiliating Tory defeat in the Christchurch by-election, where many elderly voters feared benefit cuts, Mr Major may want to avoid further alienating them. Lowering the earnings limit before benefit is lost would stop many claimants. However, it would be contrary to the advice from the Commons Select Committee on the Environment, which recommended making the cut- off point, or 'taper' more generous. It said housing benefit was responsible for the 'why work?' syndrome, or poverty trap, among claimants. The benefit's cost rose from pounds 5.6bn in 1991- 92 to a forecast pounds 7bn for 1992-93.

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