A TOP Tory has warned David Cameron that plans to cap welfare payments risk making 40,000 families homeless.

A letter from the office of Communities Secretary Eric Pickles says savings of £270million a year could be wiped out if councils have to find homes for families who cannot pay rent if handouts are cut.

Chancellor George ­Osborne wants to cap total household benefits at £500 a week from 2013.

But in the letter Mr ­Pickles' private secretary Nico Heslop warns it "raises some very serious issues", including worried housebuilders scrapping 25,000 affordable homes.

Sources have refused to comment on whether the letter, leaked to The ­Observer newspaper, was approved by Mr Pickles.

Last night his spokesman said he was "fully supportive" of all policies.