Ministers have diverted £60m from a housing hardship fund to help stem a potential revolt from backbench MPs over cuts to housing benefit. The move comes as a flagship Tory London Borough warned of the million pound cost of the cuts.
The Department for Work & Pensions confirmed £60m will be used from its discretionary housing allowance to ameliorate the impact of cuts to housing benefit rates that could drive up to 200,000 low income earners out of central cities locations across the UK.
The government’s reform will see a new cap of £400 a week for four bedroom houses and £290 per week for two bedroom homes imposed, with those on out of work benefit for more a year also hit with a 10% reduction to their housing benefit.
A DWP spokesman said the discretonary fund, which has always been available to fund those on housing benefit who have shortfall in their rents, would increase from £20m this year to £30m in 2011/2012 and then to £60m in 2012/13.
He said the fund could be available to anyone claiming housing benefit who has a shortfall between their benefit and their rent with the decisions made by local authorities “because they are best equipped to assess local need”.
The £60m is on top of £10m announced by the Department for Communities & Local Government that will be directed towards councils in London.
DCLG said the funding would be used to provide financial advice, renegotiate rents and where necessary help people move to more affordable accommodation.
The impact of the reform is expected to be particularly acute in London, where the National Housing Federation estimates that 114,000 households could be driven from their homes.
The London Borough of Barnet has estimated that the impact of the reform could lead to a bill of £1.3m for leasing temporary accommodation for those no longer able to afford their rent.
In a letter to communities secretary Eric Pickles, council leader Lynne Hillan (Con) said she had “real concerns” about the cuts to housing benefit, which would see tenants “fall into arrears and face eviction, leading to an increase in the number of homeless families being placed in temporary accommodation by the Council”.
She said the “high rent inner London boroughs” could also seek to place more families in accommodation in Barnet, which would place “additional pressure on public service provision in the borough”.
She said: “There will be a significant funding shortfall in respect of homeless families placed temporarily by the council in leased accommodation … We estimate a funding shortfall of £1.3m.”
But Mr Pickles told Radio 4 on Wednesday that he knew of “no case” of a council planning to house tenants in temporary accommodation as a result of the housing benefit cuts, which come into effect from April 2011.
The housing benefit reform dominated Prime Minister’s Questions, with Labour Party leader Ed Miliband using all his allotted time to press David Cameron on the issue.
However, despite rumblings from backbenchers about the impact of the reforms, which Liberal Democrat deputy leader Simon Hughes said were draconian, the Prime Minister said there would be no climb down.