Housing benefit payments will be given a maximum limit of £280 a week for a one-bedroom property and £400 a week for a four-bedroom property, it was revealed in the Budget.
Spending on housing benefit has risen from £14 billion10 years ago to £21 billion today. With costs “completely out of control,” Osborne highlighted that more is now spent on this benefit than the police and universities together.
“Today there are some families receiving £104,000 a year in housing benefit. The cost of that single award is equivalent to the total income tax and national insurance paid by 16 working people on median incomes.”
Osborne, added: “it is clear that the system of housing benefit is in dire need for reform.”
Campbell Robb, chief executive of housing charity Shelter, is wary of Osborne’s example, which is based on a five–bedroom property in central London. Households eligible for this amount would be a family of two adults living with an elderly relative and six children under the age of 16.
He says: "The vast majority of housing benefit claimants are either pensioners, those with disabilities, people caring for a relative or hardworking people on low incomes, and only one in eight people who receive housing benefit is unemployed.”
The coalition government’s package aims to redress the imbalance by re-setting and restricting local housing allowances; re-adjusting support for mortgage interest payments; limiting social tenants' entitlement to appropriately sized homes and increasing the budget by £40 million for hardship cases (known as discretionary housing payments).
This package will reduce the costs of housing benefit by £1.8 billion a year by the end of the Parliament.
However, Teresa Perchard, director of policy for Citizens Advice Bureau calls this budget a “missed opportunity”.
“The cap on local housing allowance rates will mean that many people on housing benefit will be unable to afford to live in certain parts of the country or will be limited to certain areas of a city, perhaps far from their place of work or job opportunities.”
“Larger families in particular may be forced into poorer quality or overcrowded housing,” she says.
However, Perchard welcomes the move to financially support disabled people in need of live-in care as they will now be able to claim the cost of an additional room.
Robb argues the real need is for more affordable housing to be built.
"The underlying issue which this budget has failed to address is the critical shortage of affordable housing, which means more and more people are being housed in the private rented sector where rents are almost double those in social housing.
"If we are to reduce the housing benefit bill in the long term we must continue to build more affordable housing."
Disability Living Allowance:
The rate of disability allowance will not be reduced; however, three times as many people claim disability living allowance today as they did when it was introduced 18 years ago.
So from 2013 new and existing claimants will have to fill to complete a medical assessment to qualify, instead of the existing forms they have to fill out.
Not mentioned in Osborne’s speech but featured in the full budget report, from October 2011, lone parents whose youngest child is aged five or above will have to claim jobseekers allowance instead of income support.
Although there is no difference in terms of monetary value, to receive jobseeker’s allowance, claimants are required to show evidence that they are actively looking for work.
The current age limit for the youngest child is 10 years old and will drop to seven years from 25 October 2010.
All existing claimants will be transferred from income support to Jobseekers from April 2012.