The Government’s plans to cut benefits by increasing them below the rate of inflation will leave the poorest families struggling to get by on incomes that will drop to levels last seen around the turn of the century.

A new briefing from the Resolution Foundation assesses the impact of raising working-age benefits in line with earnings rather than prices in terms of the savings for the Treasury and the impact on households.

It finds that nine million households – or 45% of working-age UK households – containing 30 million people will be affected if the Government goes ahead with reducing the uprating of non-protected working-age benefits, such as Universal Credit, next year.

Titled The Long Squeeze, the briefing also estimates that three million households (15% of working-age UK households) will lose over £500 as a result of the uprating.

The think tank also calculated that the policy would only save the Treasury around £3bn by 2026-27.

Adam Corlett, principal economist at the Resolution Foundation, said: ‘Plans to cut benefits like Universal Credit by uprating them by less than inflation could save the Treasury low billions of pounds, but reduce the incomes of nine million households. Working parents who receive Universal Credit and Child Benefit would be hit particularly hard, with some losing up to £1,000.

‘These cuts would come at a time when families are already set to struggle with rising prices, soaring mortgages, and the end of temporary support schemes. With benefits having repeatedly failed to keep pace with inflation over the past decade, this would see real income levels for Britain’s poorest families fall to levels not seen since the turn of the century.’