Million families on benefit will lose more than 55p in each extra £1 that they earn

More than one million families will still lose 55p or more of every extra pound they earn under the Government's flagship scheme to persuade people on benefits to take jobs.

More than one million families will still lose 55p or more of every extra pound they earn under the Government's flagship scheme to persuade people on benefits to take jobs.

The Tories accused ministers of covering up the figures in the official documents which accompanied the Budget, in which Gordon Brown promised that "low-income families would keep more of each additional pound they earn".

The statistics on the £5bn-a-year Working Families Tax Credit (WFTC), which emerged in a written Commons reply, showed an extra 340,000 families would lose 55p or more of every extra £1 they earn after the Budget, while an extra 350,000 would lose 40p or more.

In total, 1.15 million people would be hit by a "marginal deduction rate" of 40p or more in the pound and 1.1 million would suffer a rate of at least 50p. The income cuts are due to the gradual loss of state benefits as people in work boost earnings.

"Labour is bringing hundreds of thousands of families into extortionate rates of tax and benefits withdrawal," said David Willetts, Tory spokesman on social security. "Lots of families now know that for every pound overtime they earn, they will lose over 55p." He said the figures showed the WFTC scheme acted as a disincentive to people on benefits to take jobs - and dismissed ministers' claims to the contrary as "arrogant rhetoric".

The statistics came in a reply to a question by Mr Willetts by Dawn Primarolo, Paymaster General, who said the Government's tax and benefit reforms would significantly relieve the poverty trap.

Labour dismissed the Tory allegations as "completely wrong" and denied the impact of the WFTC had been covered up in the Budget.

A Labour spokesman said the number of families worse off in work than on benefits would fall from 5,000 to zero after the Budget, the number losing more than 90p out of every extra £1 they earned would drop from 130,000 to 30,000 and the number losing more than 80p would be reduced from 300,000 to 210,000.

There was more controversy over welfare policy when Jeff Rooker, Social Security Minister, said he could not live on the £93 a week income of a typical poor pensioner. He contradicted Lord Falconer, the Cabinet Office Minister, who said earlier this week that he could live on such an amount. "I couldn't and I wouldn't dream of trying," Mr Rooker told the Answer the Question programme on Sky News.

Mr Rooker hit back at Charles Kennedy, the Liberal Democrat leader, accusing him of lying in the Commons when he claimed Labour was spending a smaller proportion of national income on pensioners than the last Tory government.