Millions of families could be affected by cuts to tax credits according to a BBC report.  They are said to be considering an approach outlined by the Institute for Fiscal Studies by which tax credits would be reduced to 2003/4 levels, cutting £5bn it total from welfare spending, however, in the same report by the IFS, they said that implementing this measure would increase child poverty in the UK by 300,000.

Government sources said that the taxpayer should not be subsidising big companies paying poverty wages by making up the wages of low income people to acceptable levels.  If this policy is enacted and the government does not increase the minimum wage significantly to make up for the loss, then many more families will be driven into poverty, undermining the claim that this is a “government for working families”.

The report said that MPs and experts close to Mr Osborne believe reducing current tax credits would see low-income households encouraged to take on more work to keep their family income up, however, anyone working full-time on the minimum wage of £6.50 per hour has an income of £240 per week, without the addition of tax credits and other benefits.

The Minimum Income Standard for a family of two adults and two children is £37,469 per year, or a net income of £579.40 a week.

The IFS report outlines a number of other option that could be implemented to reduce welfare spending, including reducing the Local Housing Allowance, making housing benefit recipients responsible for a 10% co-payment in rent

Source: BBC News