The letter was sent from the office of Communities Secretary Eric Pickles A government department warned that a key Tory policy on welfare reform could result in 20,000 people being made homeless in the UK, it has emerged.
A letter from the communities secretary’s office also warned the PM a benefits cap for unemployed families was likely to cost more than it saved.
It was written by Eric Pickles’ private secretary and leaked to the Observer.
A government source said it would not get into a “running commentary” on the plan and the letter was six months old.
BBC political correspondent Gary O’Donoghue said Conservative sources had stressed that the two-page memo was old. He said this was not a “current row”.
The letter was not written by Mr Pickles himself and he was “fully behind” the policy, his spokesman said.
The memo was written by Nico Heslop, Mr Pickles’ private secretary, and sent to Mr Cameron’s private secretary, Matthew Style.
The letter said the department supported the principle of the benefits cap “on the grounds of fairness” because it was “not right that a household on benefit should receive more than the average working household”.
The fact that this document is six months old gives the government significant protection when charges of splits over the policy are levelled.
Sources say that Eric Pickles is completely behind the policy and supports the way it’s being implemented. The difficulty is that senior civil servants don’t go freelancing on policy, particularly when setting out the department’s view to Downing Street.
Indeed, the note itself explicitly suggests Mr Pickles was planning to raise these issues in a meeting on council tax benefit. The sources insist he never raised the issues in cabinet or in any cabinet committee.
So it seems we’re left with a document setting out major worries about the policy and a secretary of state who’s completely relaxed about it.
A couple of possibilities spring to mind: first that Mr Pickles is completely at odds with his private secretary over the matter; or second, and more likely, that he’s been argued round over the course of six months.
But it said the cap could cause some “very serious practical issues”.
It said the policy could result in 20,000 people being made homeless across the UK.
This figure was “on top of the 20,000 additional acceptances already anticipated as a result of other changes to housing benefit”, it said.
It outlined concerns an estimated £270m in savings from the measure did not take into account the financial implications of the policy for local authorities who would have to help more families into housing.
It said the policy “could generate a net cost.”
The letter said the department was worried about the impact of the policy on its ability to build social housing for families.
“To fund new affordable housing development providers need to be able to charge rents of up to 80% of the market levels but the impact of the overall benefit cap will prevent them from doing so in many areas greatly reducing their financial capacity,” it said.
“Initial analysis suggests that of the 56,000 new affordable rent units up to 23,000 could be lost.”
The cap would have the effect of “disproportionately impacting on families and therefore children”, the letter said, because reductions would affect family homes rather than flats.
The letter said removing child benefit from the overall benefits cap could “substantially reduce the negative impacts”.
“This would also mean the overall message of the cap would not be lost,” it added.
Such a move would also reduce the knock-on effect to local authorities and the number of new affordable rent properties lost, the letter said.
Plans for a maximum limit on the amount of benefits one family can claim were announced at the Conservative conference last October.
Chancellor George Osborne said the cap would be set at the amount “the average family gets for going out to work”, which is about £26,000 a year.
The cap would apply to the combined income from benefits including payments such as jobseekers allowance, housing benefit and council tax benefit.
About 50,000 families were expected to be affected by the cap, planned for 2013, and were likely to lose an average of £93 a week.
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