Welfare reforms will hurt the needy

Welfare reforms being pushed through by the Work and Pensions Secretary, Iain Duncan Smith, will cut into the household budgets of hundreds of thousands of low income families, according to new research.

In total, the switch from tax credits and other benefits introduced by Gordon Brown to the "universal credit" system being pioneered by Mr Duncan Smith is expected to cut the annual welfare bill by £500m. Labour says that is money taken from families in the "squeezed middle".

It has been calculated that 300,000 families where both partners are in low-paid work will be worse off, because they will lose 65p in benefits for every extra £1 they earn, which is 60 per cent higher than under the present system. Up to 100,000 low-incomes families will see the help they get towards the cost of childcare reduced by up to £3,980 a year, taking away much of the incentive to look for work.

The figures, issued yesterday by the Labour Party, were calculated by a social policy consultant, Donald Hirsch, using data published by the Department for Work and Pensions.

The scale of Mr Duncan Smith's welfare reforms is causing jitters in Whitehall because of the large numbers of people who will be affected. David Cameron considered replacing Mr Duncan Smith earlier this month, but the minister insisted on staying to see his reforms through.

Last week, the Work and Pensions select committee published a report that included responses from 70 organisations which had raised doubts about the reforms.

Another report, by the Social Market Foundation think-tank, warns that the "laudable" aims are in danger of backfiring, because most of those on benefits do not want to move to a system of monthly payments, or having rent paid to them rather than direct to their landlords, because they are worried about the money running out.