Payments for moving in Tory benefit plan

People on housing benefit will be offered cash incentives to move into smaller homes under Tory plans to slash £425m from the social security budget, it was announced yesterday.

Those living in "inappropriately" large homes will be persuaded to move to smaller accommodation, but will be given the difference in benefit for two years with the option of receiving this as a lump sum.

The move would mean that someone moving from a three-bedroom £500 a month flat, to a one bedroom, £200 one, would receive a total of £7,200.

David Willetts, the shadow social security secretary, said the £425m would account for part of the £8bn the Tories claim they could slash from the government's overall spending plans. A total of £5.3bn has already been accounted for, but there has been fierce criticism of the opposition over where they would find the extra £2.7m saving. Also, £2.3m still remains to be accounted for, but yesterday the Tories insisted that, over the next few weeks, there would be further announcements.

Mr Willetts said £50m could also be saved by forcing local authorities to meet minimum standards in administration of housing benefit and handing over responsibility for those who fail to meet these to the benefits agency. And £300m a year could be saved by cracking down on fraud, error and overpayment - which the Labour election manifesto said cost £2bn a year.

Mr Willetts also accused Labour of causing a rise in the number of homeless families since coming to power - from 102,650 in 1997-98 to 105,520 two years later, by swamping local authorities in red tape and ensuring the whole housing benefit system, was "close to collapse".

But the social security secretary, Alistair Darling, said: "The Tories are claiming to be able to save £425m on housing benefit, but their figures are simply invented and based on the most bogus assumptions.

"This is further evidence that the Tories will say anything, do anything and repeat anything in their desperate attempt to hide the £16bn hole at the heart of their tax and spending plans."