Middle-class elderly to escape the pain as David Cameron turns on the out-of-work

David Cameron to signal the end of 'compassionate Conservatism' with attack on benefit claimants

David Cameron is to rule out means testing benefits for the elderly as a way of finding the extra £10bn needed to balance Britain's books.

In a speech today the Prime Minister will say he will not renege on his election pledge to maintain universal state pensions, winter fuel allowances and free transport for the over 65s. Instead the Tories are likely to go into the election promising swingeing welfare cuts to eliminate the structural deficit at the expense of the young and jobless.

Signalling a harsh line on welfare payments, Mr Cameron will argue the benefits system has become too skewed in favour of those who don't work.

"Compassion isn't measured out in benefit cheques," he will say. "The time has come to have a real national debate and ask some fundamental, searching questions about working-age welfare: what it is actually for," he will say.

He will suggest new measures to stop jobless young people claiming housing benefit – suggesting they should live at home unless they have the means to support themselves – saving the Government nearly £2bn a year.

He will say it is wrong that many young people in work must stay at home because they don't have enough cash to live on their own, while for the jobless "it's a trip to the council where they can get housing benefit". He will also say there should be limits on benefits for people who decide to have large families – despite not working.

"We have been encouraging working-age people to have children and not work, when we should be enabling working-age people to work and have children," he will say. He will suggest changes which will make jobless people do community work to get benefits.

"We have yet to introduce a system whereby after a certain period on benefits, everyone who was physically able to would be expected to do some form of full-time work helping the community, like tidying up the local park."

Mr Cameron is mindful of polling showing huge public support for a crackdown on benefit payments. A survey by YouGov for Prospect magazine found 94 per cent of Tory voters versus 59 per cent of Labour voters feel "the government pays out too much in benefits and welfare levels overall should be reduced".

Tory strategists believe the party should take a tough line on benefits at the next election – which Mr Cameron seems to accept."I am exploring these issues not just as leader of a coalition but as a leader of the Conservative Party who is looking ahead to the programme we will set out to the country at the next election," he will say in his speech.

He is unlikely to get support from the Liberal Democrats for any of the more radical welfare proposals.

"But the substance of these proposals could be supported by the Liberal Democrats," a Lib Dem source said.

The Lib Dems are likely to go into the next election promising tax rises for the rich as a way of closing the budget deficit rather than cutting welfare.

Mr Cameron's proposals have also been attacked by charities and the Labour Party who say they are simplistic and could fuel a rise in homelessness – particularly amongst the young.

Balbir Chatrik from the homeless charity Centrepoint said: "These proposals will be catastrophic for young people and will lead to a significant increase in young homelessness, which is already on the rise. Most of the people we encounter can't go home. Many of them can't live at home safely. So what's going to happen to them?"

Campbell Robb, chief executive at Shelter, added: "It's outrageous that the government is considering undermining the housing safety net yet again.

Shadow Work and Pensions Secretary Liam Byrne labelled it "a hazy and half-baked plan" rather than a "serious back to work programme".

"Many young families with their first foot on the career ladder will be knocked off if help with their rent is taken away. And young families that want to work won't be able to move where the jobs are," Mr Byrne said.

"The way to get the spiralling benefits bill down is start getting young people and young families back to work."

Benefits who can claim what

Housing

What are the rules now and how is Mr Cameron proposing to change them?

At present if you under 25 and out of work or on a very low income, you can be eligible for government support to help pay your rent. The Government claims that this costs taxpayer £1.8bn a year.

Ministers have already tightened up the rules on young people claiming council benefit. They can now claim only for the cost of a shared room in a flat or a house and the total weekly payment has also been capped.

Now Mr Cameron is proposing to go further and scrap the benefit entirely for the under 25s – forcing them either to support themselves or go back to live at home.

What do the critics say?

The homeless charity Shelter points out that for some young people going back to live with their parents if they can't find work or lose their job is simply not an option, and the policy could result in a big rise in rough sleeping.

Shelter says there are currently fewer than 163,000 single young adults without children who rely on housing benefit and most will claim for less than six months while they are unemployed and looking for work.

In addition it points out that the policy contradicts another government proposal to encourage parents on housing benefit to downsize when their children leave home.

The verdict

The Government's claim that this move will save £1.8bn looks to be optimistic – especially when exceptional circumstances (such as domestic violence) are taken into consideration. But then, unlike the elderly, young people tend not to vote and if they do they are very unlikely to vote Tory. So in the Coalition's bid to cut the benefits bill they are an easy target regardless of the rights or wrongs of the proposal.

Child benefit

What are the rules now and how is Mr Cameron proposing to change them?

At present parents receive £20.30 a week for their first child and £13.40 for each subsequent child. In the past the benefit has not been means tested but as a result of changes in the last Budget the benefit will be progressively withdrawn from families with an income over £50,000 a year.

Those families who earn more than £60,000 a year will get nothing.

Mr Cameron is now raising the prospect of going further and limiting child benefit to a couple's first three children.

What do the critics say?

The Treasury has run through the numbers on the proposal and found that if you limited child benefit to two children you could save a lot of money – but would disproportionately hit those on middle and low incomes.

By contrast families with four children are rarer and would save much less money for the Government. According to the Office for National Statistics there are only 1.1 million households with three or more dependent children, compared with 6.4 million with one or two.

Critics say the measure would save very little money – while discriminating against those with larger families.

The verdict

The proposal seems to have been designed to appeal to those voters who believe that people on benefits deliberately have more children to get more money. It would save almost nothing while disproportionately effecting those people who need help the most.

Case study: "My baby and I would be on the streets. I don't get on with my parents"

Stacey Prigmore, 19, Northampton. She gave birth to her daughter two months ago. She fell pregnant only a month after leaving college – before she could find a job. Were she to lose her housing benefit payments, she and her daughter, Olivia, would be on the streets, Stacey says.

"I have newborn baby to support, so I cannot go out to work. My daughter and I live entirely on benefits, it is hard because I do not have any other source of financial help. I have no support from my parents; my family and I do not get on. If we lost the housing benefit contribution to our income, we would be homeless. I am trying to be independent but this would make it impossible for me to do that. I know I am a young mother and perhaps don't have the cushion older women would have. But how am I meant to afford to live when I can't go out and work?"

Under-25s needing state help caught up in the crackdown

"Young people leave home for a reason. To cut benefits would be crazy"

claudette shay, 21, south-east London. Moved out of her mother's home four years ago. She eventually found hostel accommodation through the charity Centrepoint for her and her 19-month-old son Machi. After two years living in hostels, she has found full time work and will soon be moving to a two-bedroom flat. But without housing benefit, she would be unable to cope, she says.

"Living with my parents just isn't an option. I moved out when I was 17 and because of that my mum's house got downsized to a two-bedroom place for her and my brother. She no longer needed a three-bedroom place so there's no space for me to move back. If I did, we'd be sleeping on the sofa.

"It's been really difficult for me to find housing. I've been at Centrepoint since I was seven months pregnant. A stay is normally six to 12 months. I have one room, a shared kitchen and a shared bathroom. Housing benefit is going to be crucial for me when I move into my new flat. Even for those with jobs, it's expensive. I've got myself a job which I start in August but I will still need help to pay the bills. It's a full time job, so I've got to find a nursery.

"Cameron's suggestion is just silly. There are so many young homeless people living in hostels looking to find accommodation. In my hostel there are nine young mums. They couldn't go home, even if they wanted to. They're out of home for a reason, it's not a case you can just move back home. It's really hard for young people at the moment. It's not all that easy to find a job, pay all your bills and get a flat. To cut housing benefit now would be absolutely crazy. Mr Cameron would have another riot on his hands if he did."