PM warned welfare cuts will make thousands homeless
David Cameron has received a stark warning from within his own administration that the coalition's plans to cut welfare payments risk making 40,000 families homeless.
The warning came in a letter from the private office of Communities Secretary Eric Pickles, and appears to reflect deep concern in his Department for Communities and Local Government (DCLG) over the proposal to cap total household benefits at 500 a week.
Written by Mr Pickles's private secretary, Nico Heslop, to his opposite number at 10 Downing Street, the letter warns that the estimated 270 million annual savings from the plan could be wiped out by the cost to local authorities of rehousing families who could no longer afford to pay for their accommodation.
It says that the welfare cuts will put at risk at least half of the 56,000 affordable homes to rent which the government hopes will be built by 2015, as contractors doubt whether they will be able to recoup their costs from tenants.
It is understood that the letter was written in January but has not been discussed at Cabinet level.
In the letter, Mr Heslop warned that the benefit cap announced by Chancellor George Osborne last October and due to come into effect in 2013 raised "some very serious practical issues for DCLG priorities".
He added: "Our modelling indicates that we could see an additional 20,000 homelessness acceptances as a result of the total benefit cap - this on top of the 20,000 additional acceptances already anticipated as a result of other changes to the housing benefit.
"We are already seeing increased pressures on the homelessness services."
Mr Heslop warned that "it is important not to underestimate the level of controversy" that could be generated if families are forced to divert child benefit to pay for housing costs.
SNP spokeswoman for work and pensions Eilidh Whiteford said: "For a long time we have warned about the series of cuts contained within the Welfare Reform Bill and the damaging effect it will have on the most vulnerable in Scottish society.
"These revelations today show that the leadership of the Conservative Party are well aware of the severe damage their policies will do, but choose to ignore.
"David Cameron has no option now but to ditch these absurd plans and instead install real measures which will improve the lives of thousands across the country and improve our society."
Labour shadow work and pensions secretary Liam Byrne said: "We were assured by ministers that costs wouldn't rise.
"Now top-level leaks reveal the truth. Iain Duncan Smith has promised the House of Commons he will not U-turn on the benefits cap.Perhaps now David Cameron will order him to think again."
Campbell Robb, chief executive of homelessness charity Shelter, said: "With 21 per cent of people struggling to meet housing costs, it's naive to think you can cut support without putting some people at risk of losing their home.
"The coalition should stop bulldozing through badly thought-through policies whilst ignoring independent evidence, its own expert panel and the views of those who will deal with the very real impact on people."
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