'We are dismayed that Labour are going to back down on these reforms yet again. Housing benefit is regarded as one of the biggest sources of fraud in the benefits system, but ministers have been going for a political quick-fix for five years rather than really getting to grips with much-needed reform.
Officials at the department for work and pensions confirmed that proposals to reform housing benefit were now thought to be 'manifesto territory'. Ministers are set to go ahead with piecemeal rule changes.
Former Labour minister Frank Field criticised the delay in reform, citing treasury opposition as an obstacle.
Conservative MPs are pressing to ensure that their proposed Tax Credits Bill amendments - which call for a crackdown on fraud - are debated in the house of commons during the report stage of the bill next week.