Disabled people are suffering "severe financial hardship and distress" as a result of the so-called bedroom tax, a cross-party committee of MPs has concluded.
The decision to reduce housing benefit payments from social tenants deemed to have a larger home than they need - officially known as the social sector size criteria (SSSC) but described by ministers as the removal of a "spare room subsidy" - has hit vulnerable people who were not the intended targets of the reform and have little hope of moving to a smaller property, the House of Commons work and pensions Committee found.
This comes as Lib Dem president Tim Farron is set to withdraw the Liberal Democrats' support for the bedroom tax, lashing out at the "divisive rhetoric that demonises the poor".
He is set to say that it causes "huge social problems", adding: "The onslaught of divisive rhetoric that demonises the poor can never help us create a fairer society. We believe in a welfare state that enables, that treats people as individuals rather than problems, that is unafraid of joining up the dots between housing, health and jobs.
"This is not only right and fair, it often makes economic sense - preventing a descent into chaos rather than just treating the symptoms of poverty. So we have protected housing benefit for under 25s, we have fought off further welfare cuts and going into the next election will continue to fight for a fairer society built on a stronger economy."
The work and pensions committee voted down a proposal from Labour MP Sheila Gilmore to call for the policy to be scrapped, but it did urge ministers to exempt anyone whose home has been adapted to help them with their disability, as well as any household containing a claimant receiving disability benefits at the higher level.
The committee's report also called for the exemption of carers living with disabled people from the cap which limits benefits to £26,000 a year, arguing that it has had an "adverse effect" on parents or adult children caring for a relative in their own home.
It said that it was "particularly unjust" for homeless people to be subjected to the benefits cap, as they have no choice over the temporary accommodation in which they are placed, which may force them over the limit. The committee called for them to be exempted from the cap.
The committee's chair Dame Anne Begg said: "The Government has reformed the housing cost support system with the aim of reducing benefit expenditure and incentivising people to enter work.
"But vulnerable groups who were not the intended targets of the reforms and are not able to respond by moving house or finding a job are suffering as a result.
"The Government's reforms are causing severe financial hardship and distress to vulnerable groups, including disabled people.
"Discretionary housing payments (DHPs), which local authorities can award to people facing hardship in paying their rent, are not a solution for many claimants.
"They are temporary, not permanent, and whether or not a claimant is awarded DHP is heavily dependent on where they live because different local authorities apply different eligibility rules
"Using housing stock more efficiently and reducing overcrowding are understandable goals.
"But 60%-70% of households in England affected by the SSSC contain somebody with a disability and many of these people will not be able to move home easily due to their disability.
"So, they have to remain in their homes with no option but to have their housing benefit reduced."
On the benefit cap, Dame Anne said: "The Government has stated that the benefit cap is not intended to push carers into work. But this may well be its effect unless recipients of carers allowance are exempted from the cap.
"Homeless people placed in temporary accommodation have no choice over where they are housed and few options for reducing their housing costs.
"It seems particularly unjust, therefore, for them to be affected by the benefit cap."