Demand for deep cuts in social security cash: Plan for limit on housing benefit claims

THE PRESSURE on Peter Lilley to deliver deep cuts to the pounds 86bn social security budget intensified yesterday, in the face of growing Tory backbench unrest over defence cuts.

The Prime Minister also faced demands from his own backbenchers to cut the welfare state rather than defence as Tory unrest increased. In the Commons, Andrew Robathan, Tory MP for Blaby, raised 'very real concern' at the threatened pounds 2.3bn cuts in defence. He warned the Prime Minister not to allow the growth in expenditure on social security to undermine national security.

The SNP protested at an apparent admission by the Tory candidate in the Monklands East by- election that Rosyth naval base will be closed next month.

Treasury ministers share the view of Tory MPs that the welfare budget under the Secretary of State for Social Security is the prime candidate for deeper cuts. 'The big spenders are defence, health, education and social security - we are already cutting defence; there are no votes in cutting health; we have tackled education; the last area to be tackled is social security,' one Treasury source said.

The Secretary of State for Social Security, fighting to hold onto his job in the Cabinet reshuffle, has limited room for manoeuvre but will lose credibility among his right-wing supporters if he fails to deliver savings in the welfare budget. His main target is the pounds 8.8bn housing benefit budget, but ministers are having difficulty in finding ways of cutting it. Options include setting regional limits to curb claims for high rents.

Housing benefit has soared to meet higher rents, as a result of the Government's policy of freeing up the rented sector, and encouraging councils and housing associations to charge market rents.

John Gummer, Secretary of State for the Environment, wants to change the benefit from a subsidy to individuals to a subsidy for homes. A national limit could be fixed on the amount that may be claimed. Income support could be increased to compensate, but there would be a shortfall for very high rents, which ministers believe would help dissuade claimants from renting expensive property.

That may halt the growth in housing benefit costs, which could be pounds 12bn by the end of the century. However, Mr Lilley does not believe it is likely to deliver big savings for next year's spending review. He has considered targeting child benefit and state pensions, but those options have been barred by specific commitments in the 1992 election manifesto. Invalidity benefit is being tightened and the job seeker's allowance will reduce the cost of unemployment benefit.

Tomorrow, the Cabinet will set a ceiling of pounds 263bn for spending in 1995-96, but Treasury ministers said privately they would be seeking to undercut that total.

Ministers said last night that the reshuffle could be brought forward to next Friday, 1 July. They complained that the delay was causing paralysis in Whitehall and speculation about sackings had turned some ministers into 'lame ducks'.