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Cutting a person's benefits makes them LESS likely to find work, according to a government-backed study.

The new research undermines the central argument of Iain Duncan Smith's hated welfare reforms.

As recently as March, Mr Duncan Smith was claiming people had thanked him for stopping their benefits with sanctions, because it had given them the push they needed to get a job.

The Department for Work and Pensions say the reforms, which include the benefit cap and bedroom tax, are "incentivising work".

(Image: Carl Court)

But Labour said the report would be embarrassing for the Prime Minister, and shows the benefit cap is failing.

The report, carried out by Oxford City Council and the Department for Work and Pensions said the "most statistically significant findings were that the more income a person lost from changes to their benefit, the less likely they were to move into work.

"This contradicts existing government thinking in relation to reductions in benefit payments."

The research found for every pound cut from someone's benefits, they are two per-cent less likely to find work.

It looked at 230 people who were affected by cuts to housing benefit as a result of the benefit cap, the bedroom tax or reductions in local housing allowance.

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The report concluded: "Conventional wisdom suggests that taking money off benefit claimants (eg by sanctions or cutting benefit rates) acts as a financial incentive to get a job. Our analysis says that the opposite is in fact true, at least for this project cohort.

“Higher benefit losses may correlate with higher rent and larger families, and financial hardship; as childcare and debt are established barriers to work, it is perhaps unsurprising that customers with higher benefit losses are less rather than more likely to get into or back into work.”

Shadow Work and Pensions Secretary Owen Smith said: "How embarrassing for the Prime Minister that a study in his own county shows the benefit cap is failing and making it harder for people to find jobs.

"We’ve always said that this cap was largely a gimmick and now the expert evidence is proving it.”

The DWP say they disagree with the conclusions of the report.

The benefit cap is currently set at £500 a week, but is set to be lowered to £442 a week in London and £384 outside London later this year.

Last month, Work and Pensions Secretary Stephen Crabb warned benefit claimants "now is the time" to find work if they wanted to avoid being caught by the reduction.

He said: "We are going further to ensure the amount that out-of-work people can claim better reflects the circumstances of many hard-working families.

'With the new cap coming into force in the autumn, now is the time for people to take action'."