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Benefits changes 'to hit 13m families' Budget 2015: Benefit changes to hit 13m families, claims IFS
(35 minutes later)
Thirteen million UK families will lose an average of £260 a year due to Budget changes to working-age benefits, says the Institute for Fiscal Studies (IFS).Thirteen million UK families will lose an average of £260 a year due to Budget changes to working-age benefits, says the Institute for Fiscal Studies (IFS).
Tax credit changes could hit three million families, which are likely to lose an average of £1,000, it said.Tax credit changes could hit three million families, which are likely to lose an average of £1,000, it said.
Even taking into account higher wages, people receiving tax credits would be "significantly worse off," said Paul Johnson, director of the IFS.Even taking into account higher wages, people receiving tax credits would be "significantly worse off," said Paul Johnson, director of the IFS.
The chancellor said most workers would be better off under Budget changes.The chancellor said most workers would be better off under Budget changes.
Taken together, the freeze in working age benefits and the changes to tax credits will affect 13m families, said Mr Johnson. The biggest impact on families will come from the freeze in working-age benefits and the changes to tax credits, said Mr Johnson.
But the reduction in the amount people can earn before being eligible for tax credits will cost three million families an average of £1,000 a year each. "It will reduce the incentive for the first earner in a family to enter work," he said.
"It will reduce the incentive for the first earner in a family to enter work," said Mr Johnson. The number of families affected under the IFS analysis includes those who claim Child Benefit - which will be frozen from April 2016.
Tax credit changesTax credit changes
From April 2016, anyone earning more than £3,850 a year will not be eligible for Working Tax Credit. Previously they could earn up to £6,420. From April 2016, anyone earning more than £3,850 a year will have their Working Tax Credit reduced more steeply. Previously they could earn up to £6,420.
From April 2017, new claimants for Child Tax Credit will not be able to claim for the third, or subsequent children.From April 2017, new claimants for Child Tax Credit will not be able to claim for the third, or subsequent children.
George Osborne said anyone working full-time on the National Minimum Wage - taking into account taxation changes - would be better off.George Osborne said anyone working full-time on the National Minimum Wage - taking into account taxation changes - would be better off.
Under the new National Living Wage, all workers over the age of 25 will earn a minimum of £9 an hour by 2020.
Speaking to the BBC, he said the changes amounted to a new contract with the country, which offered fewer benefits, but higher salaries.Speaking to the BBC, he said the changes amounted to a new contract with the country, which offered fewer benefits, but higher salaries.
"This is a fair deal - because you've got to have a welfare system that's fair to the people who pay for it, as well as the people who need it," he told the BBC. "This is a fair deal - because you've got to have a welfare system that's fair to the people who pay for it, as well as the people who need it," Mr Osborne told the BBC.
However the IFS said that higher wages would not compensate for cuts to tax credits.
"There is simply not enough money going in to the new minimum wage to anywhere near compensate - in cash terms - people on tax credits," said Mr Johnson.
Benefits Freeze
Most working-age benefits frozen from April 2016. Includes Job Seeker's Allowance, Employment and Support Allowance, Child Benefit and some Housing Benefit.
Replaces 1% annual up-rating since April 2013.
'£3,450 worse off''£3,450 worse off'
Earlier the Resolution Foundation - a think tank that campaigns for low and middle-income families - warned that the changes to tax credits could "weaken the incentive both to enter work, and earn more." Earlier the Resolution Foundation - a think tank that campaigns for low and middle-income families - also warned that the changes to tax credits could "weaken the incentive both to enter work, and earn more."
Taking into account the new National Living Wage, which will boost the minimum wage to £9 a hour by 2020, the Resolution Foundation said many families will still lose out. Taking into account the new National Living Wage, the Resolution Foundation said many families will still lose out.
According to its calculations, by 2020:According to its calculations, by 2020:
However, it said some families moving on to Universal Credit, or applying for tax credits after April 2017 could face much bigger losses.However, it said some families moving on to Universal Credit, or applying for tax credits after April 2017 could face much bigger losses.
For example, a low-earning couple with with three children making a new claim would be £3,450 worse off, following the tax and welfare changes set out in the budget.For example, a low-earning couple with with three children making a new claim would be £3,450 worse off, following the tax and welfare changes set out in the budget.
"We shouldn't think that a higher minimum wage will compensate all low income working families for their losses - many working households will be left significantly worse off," said Gavin Kelly, chief executive of the Resolution Foundation."We shouldn't think that a higher minimum wage will compensate all low income working families for their losses - many working households will be left significantly worse off," said Gavin Kelly, chief executive of the Resolution Foundation.
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