Benefit cuts 'will significantly reduce' incomes of poorest families

Planned cuts to benefits will "significantly reduce" the incomes of some of the country's poorest families, according to analysis by the Institute for Fiscal Studies (IFS).

The respected economic think tank said a combination of a freeze in benefit rates, cuts to tax credits and the shift to Universal Credit would mean "large losses" for low-income households.

Shadow chancellor John McDonnell said the IFS analysis showed the Conservatives posed a "clear threat" to working people's living standards, while the Liberal Democrats claimed the "savage cuts" would leave millions of households worse off.

The report said: "While cuts to benefits have been small as of yet, Government plans for future cuts would significantly reduce the incomes of low-income working-age households, particularly those with children.

"The most important changes are the cash freeze in most benefit rates, cuts to child tax credit and the continued rollout of the less generous Universal Credit.

"If these planned cuts were fully in place now, nearly three million working households with children on tax credits would be an average of £2,500 a year worse off, with larger families losing more.

"The one million families with children and nobody in paid work would be £3,000 per year worse off on average."

But the IFS stressed that many of the changes would not result in an immediate loss of income because of protection for existing claimants.

People making new claims would be affected, and existing recipients of benefits will be affected by the continued freeze in benefit rates as inflation rises.

The IFS said under current inflation forecasts the freeze until March 2020 would reduce the real value of those benefits by 5% and reduce Government spending by more than £3 billion a year.

Cuts to tax credits for families with children and the shift to Universal Credit are expected to each save the Government around £5 billion a year in the long run.

The report noted that pensioner households are mostly protected from future benefit cuts but "the impact on the incomes of working-age households with children is large", with losses of more than 10% in the poorest fifth of households.

For Labour, Mr McDonnell said the analysis revealed the "stark choice in this election".

He said: "The Tories pose a clear threat to working people's living standards. Under Tory proposals cuts to in-work support will leave working families with children an average of £2,500 a year worse off.

"This General Election is a choice between a Labour Party who will stand up for the many and a Tory Party which only looks after the privileged few."

Lib Dem spokeswoman Baroness Kramer commented: "Theresa May's plans for a divisive hard Brexit and savage cuts to benefits will leave millions of working families worse off.

"Three million households will be hit to the tune of £2,500 a year as a result of cuts to tax credits, rising prices and the falling pound.

"The Brexit squeeze will hit people in the pocket across the country, with the poorest families hit hardest."