A ministerial wrangle has erupted over plans to pay housing benefits direct to claimants rather than to their landlords.
The Evening Standard has learned that Treasury Chief Secretary Danny Alexander has taken up concerns that it will draw vulnerable people into debt and eviction.
He has written to Welfare Secretary Iain Duncan Smith warning that a big increase in rent arrears would disrupt investment in new social housing.
Mr Alexander is threatening to block the scheme unless safeguards are brought in for the vulnerable.
The plan is part of Mr Duncan Smith’s flagship universal credit reform. He believes making claimants learn to juggle their personal finances to pay for rent, food and heating is essential to preparing them to cope in the world of work.
However, early results from six pilot schemes, including one in Southwark, found the level of rent arrears went up from five per cent to eight per cent — a 60 per cent rise.
A National Housing Federation spokesman said nine out of 10 social tenants chose to have rent paid to their landlords.
He added: “The Government is planning to remove that choice. More than a third of housing associations believe the shift to direct payments to tenants under Universal Credit will make it harder for them to build new homes.”
In his letter, Liberal Democrat Mr Alexander makes clear that he backs Mr Duncan Smith’s general aims but wants safeguards to identify vulnerable people quickly and have their rent paid direct.
A source said: “There are clearly some people who simply cannot manage their own finances and will end up in arrears.
“That is also a problem for housing associations who need to demonstrate a reliable source of rental income to their lenders.”
Mr Duncan Smith is determined to make welfare claimants more self-reliant. One minister said: “It’s a major barrier to people holding down a job if they do not learn how to budget out of their pay packet. In too many cases people can’t cope and get into debt.”