Lib Dems 'ignored chance to soften bedroom benefits cut impact'

The policy is known as the "spare room subsidy" by supporters...

The Lib Dems were given the chance in March to soften the impact of benefit cuts for people judged to have too many bedrooms, BBC Newsnight has been told.

As Nick Clegg's party announces it will seek to change the policy in this coalition, or pledge to do so in its next manifesto, Newsnight understands there was an opportunity within government for the Lib Dems to amend the policy four months ago.

Options were drawn up by civil servants and presented to both coalition parties that would have allowed councils to cushion the impact of cuts under the policy - what supporters refer to as the "spare room subsidy", but which critics have dubbed the "bedroom tax".

The civil service proposed the lifting of a cap on something called discretionary housing payments (DHPs), which would have allowed councils greater flexibility to help people struggling because of the penalty.

Vulnerable groups

The Lib Dems are accused by government officials of ignoring this suggestion.

A Lib Dem source told Newsnight the party had chosen the proposals outlined on Thursday - which will see the party propose more money for vulnerable groups - over lifting of the cap on DHP.

They said: "We think if you're going to have long-term policies here then hard cash to deal with hard cases isn't the answer, but instead we need to tackle the long-term problems like [disabled people], and people not having the option of an alternative property.

"If you look at the select committee report by cross-party MPs, then they talk about policies like this that help groups rather than using the discretionary housing policy."

The Lib Dems fought successfully for the Scottish government to get new powers to lift the cap on discretionary housing payments (DHP) to help tenants who were newly affected by the housing benefit changes and so couldn't afford their housing.

'Neutralise charge'

Chief Secretary to the Treasury Danny Alexander announced the change for Scotland in May and it was explained as an attempt to neutralise the nationalists' charge that Scotland must leave the UK to end the "bedroom tax".

Civil servants had also presented the coalition with proposals that would have allowed the same principle to be rolled out across the UK.

... but opponents have dubbed it the "bedroom tax"

It is understood the move would not have required any money from central government.

Instead councils would have been given greater flexibility to use existing funds earmarked to help tenants who can't afford the extra cost.

Watered-down version

Officials were hopeful it would provide ministers with a way of ameliorating the problem without performing an embarrassing climbdown.

When Nick Clegg spoke in March at the Scottish Lib Dem spring conference in Aberdeen, a newspaper reported the Lib Dems were on the verge of announcing the policy would go nationwide.

The "spare room subsidy", officially known as the under-occupancy penalty, involves cutting housing benefit from social housing tenants with spare rooms.

Councils can make DHPs to those tenants who are at risk of falling behind in rent and getting into debt as a result of the change.

On Thursday, the Lib Dems publicly said they would take on the Tories and seek to alter the policy and, should it not be possible to get agreement with their coalition partners, they would put their watered-down version in the next Lib Dem manifesto.

They want the policy changed to mean social tenants living in properties that are too large for their needs would lose their housing benefit only if they refused an alternative property.

Disabled people would also be exempted entirely.

'No legislation needed'

With the cap lifted, councils would have been able to use that money as extra help for people.

Officials predicted some Labour councils would have done so while other councils would not.

Civil servants argued that this option could be done swiftly through changes to current regulation that could come into force immediately, rather than the need for any legislation.

The policy is enormously unpopular with Lib Dem grassroots.

The Tories have claimed the Lib Dems hid their upset from their coalition partners.

'Complete baloney'

But speaking on his LBC phone-in on Thursday, Mr Clegg said: "We are not binning the whole thing.

"We are actually going to say that it has to apply to new tenants in the social rented sector who will still only get the housing benefit they need for the number of rooms they need."

On accusations that he had hidden these feelings from the Tories, the Lib Dem leader said: "That is such complete baloney.

"We said as a party collectively we felt that this needed adjustment this year.

"I have been constantly badgering away with the DWP to try and make sure we stress-test this policy."

UPDATE 19:45 BST: The Lib Dems are insisting that the argument that they could have pushed for the changes made to the policy in Scotland to be introduced in England and Wales as well is academic, as the Tories would never have agreed to this.