£25bn further welfare cuts? 'Froth'
Lord David Freud has dismissed reports that the prime minister is considering £25 billion of further welfare cuts as ‘froth’.
The welfare reform minister, speaking to Inside Housing yesterday, said the reports are nothing more than speculation.
A leaked document drawn up by Steve Hilton, David Cameron’s outgoing strategist, reportedly called for further welfare cuts of up to £25 billion and further measures to push people back into full-time work. Number 10 has declined to comment on the document.
Lord Freud said: ‘Stuff in the newspaper is stuff in the newspaper. The reality is there is a lot of froth around the welfare budget.’
He added that George Osborne’s hint of further welfare cuts in his budget speech in March was ‘badly overinterpreted’. Mr Osborne said that without further welfare cuts ‘spending restraint will fall on departmental budgets’. A treasury analysis published with the budget showed that welfare savings of £10 billion would have to be made by 2016 to prevent cuts to other budgets.
‘The £10 billion figure was about the kind of reductions in government expenditure required and he said anyone would mention welfare as one of the components of any reduction,’ Lord Freud said.
The welfare reform minister also defended the government’s decision to not define what a bedroom is for the purpose of the under-occupation penalty for social housing tenants. The measure, which comes into effect next April, will see under-occupying tenants of working age lose £14 on average a week if they have a spare room.
He said: ‘It is not up to us to define what room is or is not a bedroom, it is up to landlords to determine that and they are perfectly capable of doing that.’
Social landlords will be left with the task of defining what is and is not a bedroom. This has led to concerns that some landlords may reclassify large numbers of properties to allow tenants to escape the tax, but sector experts have warned against this as it could reduce rental income and effect existing loan agreements.
Lord Freud said: ‘My own expectation is there will be a bit of it [reclassification] but it won’t be a widespread, wholesale move because it has income impacts. There will be some circumstances where there’s particular properties where it makes sense to look at them again, but I think social landlords will be careful to act in a way that is sensible.’ Lord Freud also said he did not expect legal challenges from tenants as a result of landlords making different decisions on what counts as under-occupation.
He said landlords have a menu of options for dealing with the penalty, including helping people with their finances, getting them into employment, encouraging them to take in lodgers and using discretionary payments. There are ‘encouraging signs’ that landlords are dealing with the penalty, he added.