The Government’s justification for its controversial “bedroom tax” has been debunked by new figures showing that up to 96 per cent of those affected have, in effect, nowhere to move.

The figures published today in The Independent expose the false argument behind ministerial attempts to spin the move as ending the “spare-room subsidy”, and confirm campaigners’ claims that it merely penalises poor people.

The policy means that tenants have their housing benefit reduced by 14 per cent if they have one spare bedroom, and 25 per cent if they have two or more spare bedrooms.

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Yet more than 19 out of 20 families hit by the bedroom tax are trapped in their larger homes because there is nowhere smaller within the local social housing stock to take them. This is shown by figures provided by councils in response to Freedom of Information requests by the Labour Party.

For the 38 councils that provided full data, 99,079 families are expected to be affected by the bedroom tax, but only 3,803 one and two-bedroom social housing properties are available – just 3.8 per cent of the homes required to rehouse the families who are hit.

Another 26 councils who responded said they expected a total of 45,669 families to be affected, but were unable to say how many smaller properties were available in their area.

Liam Byrne, the shadow Work and Pensions Secretary, said: “The big lie behind this Government’s spiteful bedroom tax is now plain for all to see. Ministers like to claim it’s not a tax, but the truth is more than 96 per cent of those hit have nowhere to move to.

“This hated tax is trapping thousands of families, forcing vulnerable people to food banks and loan sharks, and there is now a serious danger it could end up costing Britain more than it saves as tenants are forced to go homeless or move into the expensive private rented sector. David Cameron’s bedroom tax is the worst possible combination of cruelty and incompetence. He should drop it now.”

The situation is affecting local authorities around the country. In Birmingham, 13,557 households are affected by the bedroom tax, but just 368 one and two-bedroom properties are currently unoccupied. In Cornwall, meanwhile, there are just 65 one and two-bedroom homes and more than 3,300 people eligible to be charged for under-occupancy.

Steve Turner, executive director for policy at Unite, said: “These figures show beyond any doubt that Iain Duncan Smith has been misleading the public. He tried to spin the bedroom tax as a way of managing housing stock, but in fact it is a cruel and callous attack on some of the most vulnerable people in our communities.”

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“The evidence now overwhelmingly shows that the Government has made a grave mistake with this policy. They must abandon it now before more lives are destroyed.”

In Sefton, Merseyside, more than 3,600 people were competing for 18 available one and two-bedroom properties at the time of the FOI. Kevin Appleton, income manager at One Vision Housing, which manages Sefton Council’s waiting list, said that the situation was now even more stark.

“As of today we’ve got 8,360 people on the waiting list. Of these, 4,859 want one-bedroom homes and on this week’s adverts we had just six available. It’s making life very hard for people whose lives were hard anyway. The demand for three-bed properties has fallen through the floor,” he said.

Louise Harding, head of tenant services at the Coast and Country Housing association in Redcar, said in one of their worst-hit areas there were 53 three-bedroom properties empty and queues of people desperate to downsize. “It’s appalling,” she said. “We’ve got 1,100 people wanting to downsize to a one-bedroom property and on average we only have around 30 available every year. At this rate it will take 37 years for all those people to get one-bedroom homes. The iniquity of it is shocking; this about money-making.”

More than half of those affected by the policy have a disability – and campaigners say they will appeal against last week’s High Court decision that it did not discriminate against disabled people, who often need an extra room in which to sleep alone.

The Government announced last Tuesday that it would increase the emergency funds available for those affected by increased housing costs by £35m. But the handouts, known as discretionary housing payments, are a fraction of the millions needed to cover people’s shortfall in rent.

The chief executive of Citizens Advice, Gillian Guy, said: “Discretionary housing payments are worth only a small fraction of the total cut in housing benefit and are often only temporary, meaning problems can go unresolved.”

She added: “This is an upside-down approach to policy-making which doesn’t get to the root cause of why housing benefit costs have increased. We have a chronic shortage of affordable housing in the UK with over 1.8 million households on waiting lists. As long as this dire lack of housing options exists then the Government can’t reasonably tell people they have a choice about downsizing to a smaller home.”

Chris Goulden, head of poverty at the Joseph Rowntree Foundation, said: “It is very difficult to see how this policy can work without causing severe hardship, particularly as many of those affected are disabled people. The housing benefit bill could also rise if more people move into the private rented sector because of a shortage of one or two-bedroom properties in social housing.”

A spokesman for the Department for Work and Pensions said: “This ignores the fact that people may move to housing in the private sector and not all tenants will have to downsize because they could make up any shortfall through getting a job or increasing their working hours. These reforms will save the taxpayer £1bn over the next two years and help to ensure a better use of our housing stock when in England alone there are nearly two million households on the social housing waiting list, and over a quarter of a million tenants are living in overcrowded homes.”

While the DWP argues that social housing tenants who want to downsize could instead spend their housing benefit on private accommodation, there is already a major shortage of small, cheap private accommodation.

It would also defeat the cost-cutting aim of the whole policy, since the housing benefit payable for a private one-bedroom place is often more than for a two-bedroom council house. Saving enough for the deposit needed for private housing is a further issue – and a near-impossibility for those already struggling with rent arrears because of the bedroom tax.

Spotlight: Trapped by the tax

Since the introduction of the bedroom tax, thousands of families in the Cotswolds have been trapped in larger properties that they are penalised for by the new charge.

In Wiltshire, there were no unoccupied one- and two-bedroom properties at all, for 2,953 affected households, though 48 were advertised as being available shortly. The situation is similar in Gloucestershire, which had just three suitable properties for 540 people.

Jo Sutton at Wiltshire Citizens Advice Bureau said: “We’re seeing a number of clients who have been hit by this and the impact is huge for some people.”

A Wiltshire Council spokesman said: “We are doing everything we can to support families through these significant changes.”

Case Study: ‘I’m £200 in arrears and it’s only been two weeks’

Hannah Smith, 28, lives in a three-bedroom house in Hyde, Cheshire, with children Gracey, 7, and Jake, 6.

I’ve always said that this house could be for a bigger family. I’ve been asking on and off for the last six years for a two-bedroom place, but the housing association said it couldn’t happen, so I’ve been stuck here.

We had a letter the month before the bedroom tax came in, saying that due to the ages of the children, I’m under-occupying my home by one bedroom and by April we’d have to start paying extra for the rent and also council tax.

Now I’m out of pocket £48 a month. It’s stupid because they wouldn’t move me. I’m already more than £200 in arrears and it’s only been a few weeks. They won’t let me apply for a new two-bedroom place because I’m in arrears. But I can’t clear my arrears because of the bedroom tax. It’s crazy.

On the estate where I live, two-bedroom properties are very rare. Everybody is going to be queuing up for them now.

You have to juggle paying your rent and getting the food in for your children. I haven’t had to use food banks yet, but I may have to.

I’ve worked in a shop and as a care assistant, but not since I was left on my own with the children.

This tax doesn’t work. David Cameron is taking money from people who are just trying to stay afloat.”

Run-down seaside towns a ‘dumping ground’ for the vulnerable

Declining seaside towns around Britain are suffering “severe social breakdown” as they becoming “dumping grounds” for people on low incomes or welfare benefits, pushed out from inner-city areas, a report has found.

Hotels that once accommodated holiday makers are increasingly being converted into cheap flats for vulnerable tenants. The properties are also being used by councils in wealthier areas as low-cost options for housing children in care, said the Centre for Social Justice (CSJ) think-tank.

Their findings show that Britain is spending almost £2bn a year on welfare payments to people of working age in seaside towns. The report, entitled “Turning the Tide”, calls for action to revive the fortunes of seaside towns.