Cameron proposes axing youth housing benefit

LONDON (Reuters) - Prime Minister David Cameron on Sunday proposed scrapping rent subsidies for Britons under 25, in a newspaper interview likely to strain his Conservative Party's coalition with the Liberal Democrats for the second time in a week.

Requiring almost 400,000 low-paid and unemployed young Britons to live with their parents if they cannot afford market rents could save just under 2 billion pounds ($3.1 billion) a year, Cameron said in an interview with the Mail on Sunday.

Asked about the proposal in a BBC interview, Lib Dem Deputy Finance Minister Danny Alexander said the coalition had already implemented major welfare reforms - including cuts to housing benefit - and that these should be allowed to bed down first.

Separately, the Archbishop of Canterbury Rowan Williams, leader of more than 80 million Anglicans worldwide and a long-standing critic, accused Cameron of "aspirational waffle designed to conceal a deeply damaging withdrawal of the state from its responsibilities to the most vulnerable".

The Conservatives and the centre-left Liberal Democrats formed a coalition in May 2010, and have regular public disagreements, though weak ratings for both parties limit any incentive to end the coalition before elections must be held in 2015.

A YouGov opinion poll released on Sunday for the Sunday Times showed support for the opposition Labour Party at 43 percent, the Conservatives on 34 percent and the Lib Dems on 9 percent.

COALITION STRAIN

Earlier this week, Liberal Democrat leader Nick Clegg opposed plans from Michael Gove, the education minister, to reintroduce separate exams for able and less able pupils at the age of 16. Such exams were phased out in 1986, partly because they were viewed as reinforcing social divisions.

While Cameron said there would be exemptions to any ban on housing benefits for under-25s in special cases - such as for those suffering from domestic violence - he argued that the current benefits system reduced incentives for people to work.

"The system currently sends the signal you are better off not working, or working less. It encourages people not to work and have children, but we should help people to work and have children," he was quoted as saying.

Britain's unemployment rate stands at 8.2 percent - relatively low given the depth of its economic slump after the financial crisis - but for those aged 18-24 it is 19.9 percent.

The Mail on Sunday said Cameron also favoured forced community work for 5,000-10,000 people unemployed for more than 2 years who were deemed to be work-shy and unwilling to take part in training programmes.

Cameron will announce further details of his plans in a speech on Monday.

One of Cameron's main themes in the 2010 election campaign was the "Big Society," which aimed to encourage voluntary community work. It was this that the Archbishop of Canterbury decried as "aspirational waffle" in book extracts published on Sunday by the Observer.

Since the coalition took power, its major focus has been reducing Britain's budget deficit, which peaked at over 156 billion pounds in 2009/10 or 11 percent of GDP.

(Reporting by David Milliken; Editing by Todd Eastham and Andrew Osborn)