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Spending Review: 2.6 million families 'will be £1,600 a year worse off' after benefit changes

Up to 2.6 million working families could be an average of £1,600 worse off a year as a result of benefit changes announced in Chancellor George Osborne's Spending Review, according to independent economic experts.

Despite Mr Osborne's decision to scrap proposed cuts to tax credits due to come in next April, the Institute of Fiscal Studies says the introduction of the new Universal Credit, which consolidates a number of existing benefits, will result in the cut in cash for affected households.

The IFS also says Mr Osborne was "lucky" to receive a £27 billion windfall which allowed him to perform his U-turn on tax credits, adding the Chancellor will "need his luck to hold out" if he is to meet his target of a surplus by 2019/20 without raising taxes or imposing further spending reductions.

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2.6 million families '£1,600 a year worse off' after benefit changes

Mr Osborne lays bricks in a high-vis jacket after yesterday's Spending Review Credit: PA

Up to 2.6 million working families could be an average of £1,600 worse off a year as a result of benefit changes announced in Chancellor George Osborne's Spending Review, a respected economic think tank has found.

The Institute of Fiscal Studies says the introduction of the new Universal Credit, which consolidates a number of existing benefits, will result in the cut in cash for affected households.

According to The Institute of Fiscal Studies, this means that Chancellor George Osborne's U-turn over cuts to tax credits has effectively only been deferred and will have an impact when the system changes over in April.

But, as ITV News Economics Editor Richard Edgar points out, the IFS say 1.9 million families are likely to be better off under Universal Credit.

The ditching of tax credit cuts means no family will take an "immediate cash hit", the long-term generosity of the welfare system "will be cut just as much as was ever intended, as new claimants will receive significantly lower benefits than they would have done before the July changes," said IFS director Paul Johnson.

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