‘THE new cap on local housing allowance goes against the government’s whole rationale for introducing it,’ Child Poverty Action Group Chief Executive Kate Green said yesterday.

‘It is disgraceful to claw back £150 million from the poorest households when ministers are too timid to put a fair cap on multi-million bonuses to bankers,’ Green added.

‘If the housing benefit bill is looking too high, it represents the failure to deliver enough affordable housing.’

Green warned that pressing ahead with the proposed benefit cuts to private tenants would mean ‘making the poorest pay for a recession they didn’t cause.’

Under the government’s proposals, from April 1st next year, excess payments of up to £15 a week to claimants of Local Housing Allowance (LHA) would be removed.

The money is available to people in private accommodation when their contractual rent is lower than the rate of LHA.

Removing the rebate means people from the poorest households could lose up to £780 a year.

Anti-poverty campaigners warned that some people on £65-a-week Jobseeker’s Allowance could effectively lose 20 per cent of their income.

Labour MP Karen Buck said the government should not ‘under any circumstances’ take money from the poorest people. Earlier this year, homeless charity Crisis, responded to a ‘consultation’ on the changes.

‘We believe that the removal of excess payments will adversely affect those who currently receive it, who are likely to already be struggling to make ends meet on a limited income and under a system which Crisis research has shown to be ineffective in many areas,’ the charity said.

In April this year, Crisis published, ‘Local Housing Allowance: One Year On’, a report.

The report surveyed local authorities and voluntary sector agencies who deliver private rented sector (PRS) access schemes.

Crisis said its report ‘found that some landlords were raising rents to LHA rates and that many claimants were already struggling under the new system.

‘Crisis is very concerned that the removal of the excess will not only lead to an increase in these problems, but will also create further difficulties for claimants.’

Crisis called on the government to ‘rethink this hasty and ill-advised move.’

About 300,000 of the 600,0000 people who received Local Housing Allowance – which replaced housing benefit in April 2007 – gained from the measure introduced last year.

The Treasury says that the policy costs too much and that the ability to claim any surplus should be scrapped from April 1st, saving £150 million.

Right-wing Labour MP and former welfare minister, Frank Field is planning to table a motion when parliament returns in October opposing the measure and is expected to get support from other Labour MPs.