Universal Credit cuts could remove work incentives – one of the key aims of the flagship welfare policy – social landlords have warned.

Unconfirmed reports suggest that George Osborne is considering making savings by changing the taper rate in Universal Credit (UC), so that claimants lose more benefit for every £1 they earn.

Currently, Universal Credit claimants lose 65p in benefit for every £1 they earn over a threshold, however the chancellor would allegedly raise this to 75p in the 25 November Spending Review, in order to pay for measures to soften controversial tax credit cuts.

Sam Lister, policy and practice officer at the Chartered Institute of Housing, said the government’s claims that Universal Credit makes people better off in work would “evaporate” if the taper was increased to 75p.

A key flank of Universal Credit, which combines six benefits into one, has been to make work pay more in Universal Credit compared to the current scheme by introducing the 65p taper.

But analysis by Mr Lister suggests that such cuts would mean that incentives were “pretty much identical” to the current benefits system, so that disincentives to work would continue to exist.

Brendan Sarsfield, chief executive of Family Mosaic, said: “This government is prioritising reducing the debt over supporting people into work.”

Iain Sim, chief executive of Coast & Country, said: “I think the Department for Work and Pensions has got to do some careful modelling to make sure that this doesn’t act as a disincentive.”

He added: “[Ministers] have got to make sure that… it’s worthwhile for people to work because if they don’t do that, this [policy] is all just nonsense.”

Reports suggest that the work and pensions secretary is unhappy with the idea.

A total of 141,000 were claiming Universal Credit in October according to government statistics published yesterday.

The Treasury declined to comment on the claims that Universal Credit would be cut.

However, a spokesperson said: “This country cannot have an unlimited welfare budget that squeezes out other areas of public expenditure.”