Labour has announced it will abolish the controversial bedroom tax if it forms the next Government.
The party had been under pressure to scrap the Government’s spare room subsidy rule, which sees a reduction in housing benefit for those with unneeded rooms.
On a recent visit to Newcastle shadow benefit secretary Liam Byrne had said he was looking for ways to fund a bedroom tax reversal.
Tonight Labour’ announced it will pay for the return of full housing benefit, worth £470m, by reversing a recent tax cut for hedge funds and abolishing a rights for shares scheme abused as a tax loophole.
Newcastle North MP Catherine McKinnell, a shadow treasury minister, said: “The bedroom tax is raised time and time again with me by constituents, who simply cannot afford to pay it and have nowhere smaller to move to.
“The distress and anxiety it is causing to some of the most vulnerable people in our community is appalling and I’m delighted by Ed Miliband’s announcement that a future Labour Government would repeal the policy.
“I have raised this issue on more than one occasion directly with David Cameron, who either doesn’t understand the damage the bedroom tax is doing or simply doesn’t care. The fact that it will end up costing more than it saves just highlights how bad this policy is – but the Prime Minister appears totally oblivious to this issue.
“I believe the bedroom tax illustrates all you need to know about how badly out-of-touch the Coalition is, targeting the most vulnerable whilst handing out tax cuts to Britain’s millionaires and hedge funds operated by Tory donors.”
By funding the move through a change to hedge funds and other business benefits the party hopes to see off any Conservative attack.
The move comes after Liberal Democrats backed a motion calling for re think on the bedroom tax at the party’s annual conference.
In Newcastle alone, around 7,000 Your Homes Newcastle tenants are thought to be affected, with 60% going into arrears totalling £750,000 less than three months after the introduction of the policy in April.
And recent figures showed there are more than 3,000 people looking to downsize in the city, but only 42 one-bedroom properties available.
Already Your Homes Newcastle has started legal proceedings against those in arrears, with the threat of eviction hanging over some families. It is unclear what, if any, impact the Labour announcement would have on this, though protestors have previously indicated they could challenge eviction and hold on until a Labour Government was formed.