The Chancellor George Osborne has insisted that millions of Britons will be better off because of his changes to tax credits
In the first Conservative Budget since 1996, Mr Osborne said middle class families will be given a tax cut under plans to raise the 40ptax threshold.
It is a move that could save middle-earners up to £1,300 a year.
The cuts, which will be worth £12 billion a year by 2020, also include restricting child tax credits and universal credits to two children for new claimants from 2017.
The income threshold for tax credits will be reduced from £6,420 to £3,850.
And the rate at which a household’s tax credit is reduced as it earns more is to be increased to 48 per cent.
Speaking on Good Morning Britain he said: “If you are a typical family and working full-time on the current national minimum wage – because of the national minimum wage and because of the welfare savings we’ve made – you will be better off.
“And for those working on salaries a bit higher than the current minimum wage, you’ll also be better off because there will be a ripple effect as wages rise… that will mean six million people with higher pay.”
The Chancellor also used the Budget to introduce a compulsory “living wage”, dramatically declaring that “Britain deserves a pay rise”.
It means that from next April anyone over 25 will be entitled to £7.20 an hour, that figure will then rise to £9 by 2020.
Labour and the unions have described the plans as a ‘work penalty’ and an ‘assault on the poor’, with Labour leadership contender Liz Kendall describing it as a “con”, while the Institute for Fiscal Studies said Mr Osborne was “taking a bet” on the economic impact of the policy.
The £26,000 benefit cap, the amount one household can claim in a year, will also be cut to £23,000 in London and £20,000 in the rest of the country.
Work and Pensions Secretary Iain Duncan Smith is expected to tell MPs later that many of the changes are about ‘ensuring that people on benefits face the same choices as those in work and not on benefits’, such as having to work out the number of children they can afford.
He will point to the lowering of the benefit cap, saying it ‘re-emphasises the message that it’s not fair for someone on benefits to be receiving more than someone in work’.