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The overhaul of the benefits system will cost Cardiff’s economy an estimated £100m – the equivalent of 1,050 jobs, according to a council inquiry into the UK Government’s welfare reforms.

Cardiff council officers told the inquiry that the estimate – comprised of a £75m drop in economic output and £32m gross value added – was “conservative”.

The loss to the capital’s economy could as be as much as £119m, they suggested, but the actual impact wouldn’t be known until all the changes were implemented.

From this week, 2,300 council housing and 1,800 housing association tenants in Cardiff are will be affected by the so-called “bedroom tax”, which mean households who are deemed to be “under-occupying” face a cut in their benefit.

A further 400 families will be affected by the £26,000 benefits cap, including more than 100 households who will be worse off by about £100 per week.

Universal Credit, which will replace benefits including income support and housing benefit with a single payment, are not expected to be introduced in Cardiff until next February.

Canton’s Labour councillor Ramesh Patel, who chaired the task and finish group, said the reduced spending power of benefit claimants would have repercussions for local business owners.

“Small business owners, such as local shops and cafes, will be affected. If people have not got any money then they can’t spend it and this will have a massive impact,” Coun Patel said.

“It triggers a chain reaction as these shops will then begin to not purchase as much goods from the wholesalers and that is when the entire economy really starts to suffer.”

Coun Patel said claims by George Osborne that welfare reform had the support of the “great majority of working people in Wales” showed the Chancellor was “not in the real world”.

Cardiff North’s Conservative MP Jonathan Evans, however, said the rise in the personal tax allowance to £10,000 from Saturday would have a positive impact on “infinitely” more Cardiff residents than the benefits shake-up.

“But that doesn’t suit the agenda of the welfare lobby in the Labour leadership of Cardiff council,” Mr Evans said.

“The reality is that there are significantly more people in work in Cardiff than on benefits and the rise in the personal tax allowance will put more money in people’s pockets to spend in Cardiff.”

Equalities charity Diverse Cymru told the task and finish group it was concerned the changes could lead to a rise in hate crime against disabled people as a result of certain media “demonising” benefits claimants.

Other witnesses also raised fears of a rise in other crimes, such as prostitution, theft, shoplifting, begging and domestic violence.

The task and finish group, comprised of five Labour councillors, made 17 recommendations, including that headteachers be briefed to look-out for signs that a pupil’s home life was being adversely affected.