Welfare reform 'to hit families'

A leading financial think tank has warned that the Government's flagship welfare reforms will mean more than one million families will be worse off.

The planned "universal credit" - earmarked to replace a raft of existing tax credits and benefits - would create clear winners and losers, according to the Institute for Fiscal Studies (IFS).

Among those who will be be hit hard in the long run under the new system will be lone parents and families with savings of over £16,000, the IFS said.

The universal credit is at the heart of Work and Pensions Secretary Iain Duncan Smith's proposals to streamline the welfare system, as well as creating incentives for claimants to get off benefits and into work.

In its analysis, the IFS calculated that under the new system 2.5 million families would gain in the long-run and 1.4 million would lose, while 2.5 million would see no change to their benefit and tax credit entitlements.

The changes will benefit poorer families more than those who are better off, with the bottom six tenths of the income distribution gaining on average while the top four tenths lost out slightly.

Couples with children will gain more than couples without children who will, in turn, do better than single adults without children. However lone parents will, on average, be worse off.

The IFS stressed that within all family types some people would be worse off, with couples with children who have savings of more than £16,000 among the losers.

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