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Big earners living in council houses or flats and paying cheap subsidised rents are to lose the perk in a Budget crackdown this week.
Sky News understands George Osborne will announce that anyone earning over £40,000 in London or £30,000 outside the capital will lose benefits and have to pay the full market rent.
The crackdown, which will save taxpayers £250m a year, is aimed at the likes of Frank Dobson, who still lives in a council flat near the British Museum, despite serving as a Cabinet Minister under Tony Blair and earning a six-figure salary.
The late Bob Crow lived in a council house in east London, thought to be paying just £150 a week in rent, while he was the militant leader of the RMT union with a pay and perks package of more than £140,000. When challenged, he said he made “no apology” for living in social housing.
Now the Chancellor is expected to use Wednesday’s Summer Budget to announce an end to a system that sees hundreds of thousands of higher earners using the benefit system to claim taxpayer-funded subsidies for their rent.
Mr Osborne is likely to announce that from 2017/18 those on incomes above £40,000 in London and £30,000 in the rest of England that live in housing association and local authority properties, will be charged a market or near market rent.
The move follows steps taken over the last five years that enabled housing associations and local authorities to charge market rents to those on incomes of more than £60,000.
The Government estimates that higher income social tenants benefit, on average, over £3,500 per household from reduced rent and represent approximately 9% of all social tenants in England.
This includes over 40,000 social rented tenants with household incomes in excess of £50,000 per year; and a further 300,000 with incomes over £30,000 per annum.
The additional rental income that local authorities receive from ending these taxpayer-funded subsidies will be returned to the Treasury and used to reduce national debt.
Dubbed "Pay to Stay" in Whitehall, the crackdown will raise up to £250m per year in 2018-19 towards reducing the deficit and generate extra income for housing associations to reinvest in affordable housing.
The emergence of a purge on rich council house tenants follows the disclosure by Sky News that Mr Osborne will use his Budget to announce raising the inheritance tax thresholds for couples to £1m .
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