LIBERAL Democrat MPs sided with Labour by piling pressure on Nick Clegg to axe the ‘bedroom tax’ – branding it “a mistake”.

Redcar MP Ian Swales helped spark the fresh revolt against the removal of the so-called ‘spare room subsidy’, warning its harsh impact was “unacceptable”.

Mr Swales was among five Lib Dems who signed a Parliamentary motion calling on the Government to “conduct an urgent review of the policy and make changes”.

The motion added: “If the department [for work and pensions] refuses to do this, the policy should be scrapped altogether.”

But, during a Commons debate, a Lib Dem welfare minister stood shoulder-to-shoulder with the Conservatives, insisting critics of the bedroom tax were wrong.

Steve Webb vowed to defy growing calls to halt housing benefit cuts for tenants willing to ‘downsize’ but unable to move - because no smaller home is available.

Instead, he insisted local councils had been given adequate cash to help people facing cuts but unable to move, called discretionary housing payments (DHPs).

A further £20m had been set aside for town halls that ran out of cash, MPs were told – but only 12 councils had so far applied to it.

Mr Webb said: “The local authority should be asked to explain whether it has spent its cash and, if it has spent all of its cash, whether it has asked the Government for more cash.

“We need action on overcrowding, we need fairness between social and private tenants and we need action on the deficit.”

But, in a powerful speech, Mr Swales said Redcar Borough Council had been able to accept only 58 of 1,307 applications for help – because it had run out of money.

And he accused the Government of making housing policy “dictated from within the M25” that was not relevant away from Greater London.

Mr Swales said: “There is housing blight, because there are three-bedroom houses that people don’t want to take.

“My constituency made the front pages because it will take 37 years for one-bedroom properties to become available for all the people who need them.”

The Redcar MP praised the Government for an earlier U-turn that exempted disabled children from the bedroom tax.

And he said: “Let’s do the same for disabled adults, instead of making people go through the demeaning process of applying every quarter, on a deeply intrusive form.”

Despite criticising the policy, Mr Swales did not take part in the vote. The division list did not say whether he or 20 other Lib Dems who followed suit, abstained or had a prior excuse to miss the vote.

The removal of the spare room subsidy – a policy designed to save £500m and free up larger homes for families in cramped properties - was introduced last April.

It has penalised social housing tenants with spare rooms, cutting housing benefit by 14 per cent for an extra bedroom and 25 per cent where there are two.

The Lib Dem leader has so far refused to bow to calls for an urgent review – despite his party conference condemning the policy as “reprehensible and evil”.