Backbench 'revolt' over benefit cut

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The Government is consulting on removing a measure which allows people on low incomes to keep up to £15 a week of their housing allowance if they pay rent at a lower level than the maximum benefit.

The move, which would come into effect next April, has prompted Labour MPs to launch a campaign similar to that mounted over the abolition of the 10p income tax rate.

Currently, half of those receiving the housing allowance, around 300,000 people, have managed to get their property at a rent lower than locally-set thresholds, allowing them to pocket some of the saving. Removing the ability to claim the leftover cash will save around £160 million, the Department for Work and Pensions estimates.

But senior Labour MP Frank Field, who led opposition to the abolition of the 10p rate, described it as a "vicious little cut".

The system was set up in the hope that by giving an incentive for tenants to bargain with landlords to cut rent, overall rent levels could be reduced. Mr Field said: "This absolutely flies in the face of that. In the future there will be no incentive for tenants to bargain with their landlord."

The saving amounted to "chicken feed" compared with the overall cuts to public expenditure that needed to be made, he said.

The former welfare reform minister said: "What we need is for the Government to cut public expenditure by £100 billion, that's how precarious our national accounts are. We are not going to meet that with these vicious little cuts."

Homelessness charity Crisis said people on £65-a-week jobseeker's allowance could lose 20% of their income under the proposals.

A spokeswoman for the Department for Work and Pensions said: "Local housing allowance is aimed at providing the people who need it most with decent accommodation. This small change will not affect our customers' ability to pay their rent and further support is available to those on a low income to help with other expenses."