Benefits Cap 'Could Leave Thousands Homeless'

A cabinet minister has told Sky News that "deserving cases" will be helped amid fears a £500-a-week housing benefits cap may leave 40,000 people homeless.

Deep-seated concerns within Government over the Chancellor's plan to cap benefits for families have been laid bare in a leaked letter apparently seen by The Observer newspaper.

The letter, from Communities Secretary Eric Pickles' private secretary to his opposite number in the Prime Minister's office, will be deeply embarrassing to the coalition.

It suggests the estimated £270m saving from the cap may end up as a net loss, because 40,000 people could be made homeless.

In addition, it suggests, half the 56,000 affordable homes the Government expects to be constructed by 2015 will not be built because developers will not be able to recoup enough money from tenants.

Health Secretary Andrew Lansley told Sky's Dermot Murnaghan that he understood the letter had been written several months ago.

But he said measures had to be taken to tackle the housing benefits bill.

"We have made available £190m to support discretionary funds and support for the homeless to make absolutely sure that there are means by which, where there are particularly deserving cases, they can be looked after.

"But we have to come back to the fundamental proposition, which is that the housing benefit bill was out of control.

"Nobody thought it was fair that people on benefits could live in properties and have rent paid for them that were far in excess of the rents paid on properties that people who were taxpayers are living in.

"We have got to arrive at a situation where people who are in work see the benefits of being in work and it pays to be in work."

"But the housing benefit system bill was out of control. Nobody thought it was fair that people on benefits should live in properties, with rents paid for, that were far higher than those paid by the taxpayer."

A spokesman for Mr Pickles said: "We are fully supportive of all the Government's policies on benefits. Clearly action is needed to tackle the housing benefit bill which has spiralled to £21bn a year under Labour."

And a Downing Street spokesman said: "The entire Government is behind the policies on welfare and housing benefit.

"The bill has been growing enormously in recent years and needs to be tackled."

Nonetheless, Labour will seek to capitalise on what it sees as confusion and division at the heart of Government.

Shadow work and pensions secretary Liam Byrne is quoted by the newspaper as saying: "We were assured by ministers that costs wouldn't rise. Now top-level leaks reveal the truth."