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Child benefit should be scrapped and disability benefits taxed, Iain Duncan Smith’s ex-welfare adviser has suggested.

Charlotte Pickles, who helped to create the hated ‘bedroom tax’, says cuts on this scale would save nearly half of the £12bn proposed reduction in welfare spending.

Scrapping child benefit would save the treasury £4.8bn, reports the Mirror, with the poorest families paid a nominal sum through the new Universal Credit system.

However, it remains unclear as to whether the payment would be equivalent to that made under child benefit.

The suggestion is likely to be met with shock and anger from child poverty campaigners.

In a report for the independent think tank Reform, Ms Pickles says the move would reduce welfare spending on middle-class families.

The report claims that cutting back on benefits for higher earners would ensure that ‘social security expenditure is spent on those in need’.

Ms Pickles said: “The Government has to achieve cuts in the welfare budget without going too far, too fast.

“Cutting child benefit would be fair but freezing or cutting tax credit rates would not.”

Prime Minister David Cameron recently ruled out any cuts to child benefit, but has failed to clarify if disability benefits will be targeted by the government.

According to the report, taxing Disability Living Allowance and its replacement Personal Independence Payment would save £0.9bn.

The report also argues that the monetary value of the work-related activity group of Employment and Support Allowance should be reduced to Jobseeker’s Allowance levels – currently £73.10 a week for 25’s and over.

Finally, the report recommends building more social homes to stem a sharp rise in housing benefit expenditure, which has increased from £16.6bn to £24.4bn in only a decade.

“The Government should reverse the shift towards private rental accommodation by investing in new social housing,” the report said.

“This would require substantial capital investment, but over time would reduce the housing benefit bill and ensure that taxpayer money is being spent more efficiently.”

The government’s policy of extending ‘right to buy’, “risks depleting the stock of social housing further and therefore increasing the housing benefit bill in the longer term”.