Warning bedroom tax will cost money

Labour’s Baroness Hollis of Heigham said ministers claimed the policy, which is officially called the under-occupancy charge, would lead to savings of £490m.

But she said the claim was “false” as it was based on assumptions that would not come true.

Lady Hollis, who served under the previous government, issued her warning in the House of Lords as peers debated the impact of the bedroom tax. The policy means social housing tenants are docked benefit if they are deemed to have too much room.

Lady Hollis said the Government’s modelling assumed 90 per cent of people hit by the benefit cut would remain in their home, but surveys showed only 60 per cent wanted to “stay and pay”.

She told peers that costs such as people running up arrears and moving into expensive bed and breakfast accommodation had to be taken into account.

“The public purse – I’ve done the stats – far from making savings, makes a significant loss,” she said.