A property expert has slammed proposals from a think tank to reduce the £26,000 a year benefit cap outside of London and the South-East.

The centre-right think tank Policy Exchange has suggested that a regionally based benefit cap, which takes into account varying living costs across different regions, could save the government £100 million a year.

Policy Exchange, who has close ties with the Conservative Party, recommended that the benefit cap should be set at £23,400 outside of London and the South-East. The suggestion is part of a report that will examine how George Osborne’s 2015 general election pledge to cut a further £12 billion from the welfare budget could be achieved.

Ajay Jagota, from a North-East based sales and letting business, said that if benefits are capped based upon regional differences in living costs, then taxes should also be capped using the same analogy.

“You can’t just pick and choose what government decisions are based on local living costs and which aren’t”, Mr Jagota said.

Mr Jagota told 24dash.com that the policy “won’t save a penny” and would just “push up costs elsewhere”.

Lowering the benefit cap would result in tenants falling into arrears on their rent as their incomes fall, said Mr Jagota. The UK “could end up with a postcode lottery which hurts landlords, not layabouts”, he said.

So far the benefit cap has had very little impact on government welfare expenditure. Official figures suggest that the policy has cut social security spending by just 0.08% since it was introduced in April 2013.

Mr Jagota said: “If this really was a problem, wouldn’t the streets of the North East be awash with southern jobseekers, migrating North for an easier life? It’s certainly not something I’ve seen much evidence of.

The property expert said that a regional benefit cap could have a negative impact on local economies and landlords, by making it less appealing for people to move and work outside of the capital.

“The real problem in need of tackling is London’s broken housing market, where there are too many people and not enough houses. The North East shouldn’t have to subsidise that, especially when you’re actively making it less appealing for people to move to other parts of the country.”