Plans to increase benefits by less than inflation will make seven million families – half of Britain's working households – worse off by an average of £165 a year, according to an analysis by the Institute for Fiscal Studies (IFS).
A former Liberal Democrat minister, Sarah Teather, said today that she would defy her party's leadership and vote against George Osborne's proposals when they are debated in the Commons today. Several other Lib Dem MPs are also considering whether to oppose.
Announcing the move in last month's autumn statement, the Chancellor said it was designed to ensure that "families out of work will not get more than the average family gets for being in work".
But the IFS study demonstrates that seven million families with a member who is working will also take a big financial hit as a result. This is because maternity pay, child benefit and low pay tax credits are also subject to the cap. The IFS's researchers also warned that the cap "exposes the poorest to inflation risk", if prices increase by more than expected in coming years.
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