Half of Britain's families will get new state payout

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The Independent Online

Almost half of Britain's 27 million families will qualify for means-tested state benefits after last week's Budget, an analysis by House of Commons officials showed last night.

The Tories said the figures showed Gordon Brown's new tax credits for families and pensioners were creating a "means-tested Britain" which would eventually result in nearly everyone being covered. They said it was ludicrous for families earning up to £37,000 a year to gain help with child care in the Working Families Tax Credit (WFTC) scheme.

The Chancellor has said his cash top-ups will increase the incentives on low-paid families to move off benefits into work. In the Budget, he flagged up a tax credit to allow poor pensioners to keep more of their income.

Statisticians in the Commons Library calculate that 6.5 million families are already on means-tested benefits. They say that could rise to 13 million as a result of the new schemes in the Budget.

An extension of the WFTC would add 500,000, an integrated child-care credit would add a further 3.5 million, an employment credit could cover 300,000 to 400,000 households without children, and 2.5 million families might qualify for the pensioners' tax credit.

"If Gordon Brown has his way, half of all families in Britain will be trapped on means-tested benefits," David Willetts, the Tory spokesman on social security, said last night. "Means-testing on this scale penalises effort, undermines saving and spreads dependency," he added. "A means-test rewards people who have never saved, reduces the incentive to work hard and encourages dependency on the state."

Mr Willetts said the minimum income guarantee for pensioners reduced benefit for those with modest savings or who did part-time work. The WFTC effectively set a ceiling for earnings above which it was no longer worthwhile doing overtime, he claimed.

But ministers rejected the criticism. A Labour spokesman said: "David Willetts is highlighting Labour's introduction of a range of measures through the tax and benefit system to help working families.

"The Tories oppose these measures because they favour tax cuts only for the few and would abolish the WFTC, which is already helping one million families. That is the real difference - Labour is standing up for hard-working families, the Tories are planning to harm hard-working families."

In another Tory attack on the Budget, Michael Portillo, the shadow Chancellor, released Commons Library figures showing a typical working family would pay £670 a year more in tax after the Budget.

Mr Portillo said Mr Brown was wrong to say working families had a lower tax burden than at any time since the 1970s. He said the Chancellor's figures excluded indirect taxes.

The Government is to recruit a 400-strong team of fraud investigators in an attempt to reduce the size of the black economy, Alistair Darling, the Social Security Secretary, announced last night. They will target tax and VAT fraud and company bosses who helptheir workers defraud the benefits system.