MPs in the commons have just voted on George Osborne's plans to cut tax credits, and have approved the measures which will aim to save £4.4 billion from the welfare budget. Despite opposition from Labour and the SNP the cuts will go ahead, and this is going to hit families hard.
The plans were announced in the Queen's Speech in June, and they will lower the earnings level above which tax credits are withdrawn from £6,420 to £3,850, and the rate at which the benefit is lost will also speed up. Tax credits will also now be limited to two children per family.
Tory ministers say the idea is to "raise pay and incentivise work", and Labour say it is an "ideological attack" on working families. The changes will come into force with the new tax year from April 2016, and Labour claim that three million families face losing an average of £1,000 a year. It is estimated that 870,ooo families currently in receipt of tax credits have more than 2 children, so those will see their income cut dramatically.
The treasury minister has said that eight out ten households would be better off by 2018-9 as a result of the new national living wage, an increase in the personal tax allowance and extend childcare subsidies.
So what do you think of these tax credit cuts? They are going to mean a reduction in income for both working and non-working families, so as the government struggle to balance their books it looks like millions of families are going to have to rethink their own budgets too.