Channel 4 News has learned that the budget given to new social housing will be reduced by up to 80 per cent and child benefits for the over-16s will be cut. Economics Editor Faisal Islam reports.

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New homes are constructed on the site of the huge Aylesbury council estate in Southwark, home to 7,500 people, on September 21, 2010 in London, England.

The Chancellor George Osborne will announce cuts on Wednesday of up to £83bn. Channel 4 News has learned that £3bn of those savings could come from ending child benefits for over 16s, something that will affect up to two million families.

Also, £8bn spent on building affordable social housing will also be slashed.

Housing Associations were given a 40 per cent government subsidy to build some 50,000 homes last year, nearly half of the entire stock of new homes. Insiders suggest that if cuts reach 80 per cent of the Budget that new social housing will collapse to just a few hundred per year.

This will, say housing associations, collapse house building in Britain, even further - Faisal Islam

But the Chancellor George Osborne insisted Britain would emerge stronger, saying there were tough choices ahead but he would see the spending cuts through.

He said: "The priority has been to target waste and welfare, to invest in our healthcare, to have real increases in our school budgets and to invest in the things that are going to make our economy strong.

"We have got to make some tough decisions but the priority is healthcare, children's education, early years provision - particularly for some of our poorest - and the big infrastructure developments like Crossrail, Mersey Gateway, the synchrotron, broadband.

"Those things are actually going to get us out of this stronger and able to pay our way in the world."

Faisal Islam blogs on the full details of the Welfare spending cuts:

Here are some of the headlines.

Massive cuts to welfare. The Chancellor talked last month about £4bn extra, in addition to the £11bn announced at the Budget. That £4bn is now 'markedly' larger, with one government insider suggesting 'seven or eight billion'.

Expect a restriction on the age to child benefit to 16-years-old, though slightly mitigated in some way. Expect the tax credit system to be fundamentally reduced in scope and generosity. These savings can not and will not be just about targeting middle class welfare. The poor will be hit.

In theory that should allow the average cut in non protected departments to come closer to 21-22 per cent than the 25 per cent announced at the June Budget.

Happy days? Well not at all.

Some sub-departments at the Communities Department, and Vince Cable's Business department face basic decimation. Government insiders have confirmed that the rough magnitude of cuts to the £8.4bn social housing budget, and the £3.9bn university teaching grant will be 60-80 per cent.

This will, say housing associations, collapse house building in Britain, even further. Social landlords put in 60 per cent (to the taxpayers 40 per cent) of the funding for almost half (50,000) of the 113,000 homes built in the UK last year. Insiders suggest that will fall to hundreds.

Read the rest of Faisal Islam's blog: spending cuts target child benefits, tax credits and social housing

Social Housing Debate
Joining us from East London was Stephen Timms Labour's shadow work and pension secretary - and with us in the studio was David Orr, the Chief Executive of the National Housing Federation, which represents over a thousand housing associations.

David Orr strongly attached the decision to cut social housing saying: "What we're seeing now is a sustained assault on people who are in poor quality homes, who are homeless or badly housed. Even those who are in homes are likely to lose them because of the housing benefits cut.

"This will not just have a profound impact on people who are homeless but it will take 40,000 construction jobs out of the economy.

"It feels economically incompetent to me."

Stephen Timms said of the child benefits cuts "If there's going to be more cuts in child benefit, as well as the £12bn VAT rise in January, that will have a big impact on household income and therefore spending.

"Therefore on the economy, the risk to the economy and return to growth to the economy I'm particularly concerned about."

Timms said he felt the George Osborne's plans for reducing the deficit were going "a lot further than we would have gone, to an extent which puts the recovery of the UK economy at risk."

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