Osborne Set to Curb Level of Housing Benefit in U.K. Budget

Chancellor of the Exchequer George Osborne is likely to start his crackdown on welfare in Wednesday’s budget by making higher-earning tenants in taxpayer-subsidized housing pay market rent.

From 2017, people earning more than 40,000 pounds ($62,000) in London and 30,000 pounds in the rest of England living in housing association or local authority housing will no longer be able to claim state subsidies for their rent, according to a Conservative Party official who asked not to be identified in line with British government practice. They will instead be charged rent in line with or close to market rates.

Osborne has pledged to find 12 billion pounds a year in welfare cuts, and will set these out on Wednesday when he delivers his first budget in a majority Conservative government. The Tories pledged ahead of the election that they would reform the benefits system and strengthen the economic recovery, as part of the government’s plan to eliminate the budget deficit through further austerity.

The move further lowers the starting point at which social tenants are charged market rent from its previous threshold of 60,000 pounds. Tenants in the higher-income brackets affected by the change represent about 9 percent of all social tenants in England, benefiting on average from more than 3,500 pounds per household in reduced rent, the official said.

The move -- dubbed “Pay to Stay” -- may raise as much as 250 million pounds a year. Additional rental income received by local authorities from ending those subsidies will be used to pay down Britain’s national debt. The extra money saved by housing associations -- charitable bodies that rent homes to those deemed to be in need -- will be reinvested in affordable housing.