Housing tax credit plan is shelved

SWEEPING REFORMS to housing benefit are expected to be shelved until after the next general election in an attempt by the Government to avoid a backlash from working-class voters.

Ministers confirmed yesterday that proposals to change the pounds 11bn-a-year system, which helps 4.5 million tenants pay their rents, would be outlined in a Green Paper by the end of the year, as promised in the March Budget. The benefit is likely to be converted into a tax credit to boost the incentives to the jobless to find work.

But ministers said that while some fine-tuning might take place in the next two years, the bulk of the changes would be deferred until after the next election. "This is for the second term," one source said. "Any changes are bound to create losers and we have to tread carefully."

The Government's cautious approach will be seen as an attempt to avoid alienating Labour's traditional supporters after many of them abstained in this month's Euro elections.

A special cabinet committee, chaired by Tony Blair, is reviewing housing policy. Gordon Brown, the Chancellor, is leading the drive for reform and favours a tax-credit system that would mirror his working families tax credit for low-paid employees, which comes into effect in October.

The other members of the committee are John Prescott, whose Department of the Environment, Transport and the Regions is responsible for housing, and Alistair Darling, the Social Security Secretary.

A key aim will be to give tenants a financial incentive to move to smaller accommodation when they can - for example, when their children leave home. The present "blank cheque" approach under which tenants on benefit have all their rent paid has allowed widespread fraud and the cost of the system to spiral.

Yesterday Mr Darling said: "The present housing benefit system can't continue, it needs to be reformed. The case for change is overwhelming."

However, he moved to head off a possible rebellion by Labour MPs by promising the Government would listen carefully to any criticisms of the Green Paper.

Mr Darling conceded that a tax credit system would not necessarily help those out of work. "The idea that there would be no housing support in its place is misconceived. We want to bring housing benefit up to date," he said.

The Government's welfare reforms moved a step further yesterday when it launched the four pilot projects in which new claimants for unemployment and other benefits will have to attend interviews with a single "personal adviser". The scheme is likely to go nationwide next year and compulsory interviews could later be extended to existing claimants, who could lose their benefits if they refused to attend.

David Blunkett, the Education Secretary, said: "[The scheme] will treat people as individuals, taking tough action against those who can work but refuse to do so, giving strong support and guidance to those seeking work and providing proper security for those unable to work."