GEORGE OSBORNE’S blue-collar Budget claims were torn apart yesterday by Britain’s top economists, who warned that most working families would be worse off.

The Chancellor attempted to cover up benefit cuts for low-paid workers in Wednesday’s Budget by announcing a “national living wage” of £7.20. Welfare axeman Iain Duncan Smith led cheers as the Chancellor hailed it as proof the Tories were “the party of the working people of Britain.”

But his claim was crushed by Institute for Fiscal Studies (IFS) calculations showing that most working people will lose more than £1,000 a year. Speaking at the IFS post-Budget analysis, director Paul Johnson said: “The key fact is that the increase in the minimum wage simply cannot provide full compensation for the majority of the losses that will be experienced by tax credit recipients. That is just arithmetically impossible.”

He added: “Unequivocally, tax credit recipients in work will be on average made worse off by the measures in the Budget.”

Their verdict was a second major blow for the first all-Tory Budget since 1996, after the Living Wage Foundation dismissed Mr Obsorne’s claim that a 70p increase in the minimum wage was a “national living wage.”

Before tax, around 2.7 million low-paid workers will collectively receive £4 billion by 2020 through the higher minimum wage. But welfare spending will be cut by £12bn, including £6bn worth of cuts to working and child tax credit. Thirteen million families will lose £260 a year by a four-year freeze on all working-age benefits, while three million of those will lose £1,000 a year after tax-credit cuts. The income threshold for tax credits was cut from £6,420 to just £3,850 and families will no longer receive support for any more than two children.

“A higher minimum wage will bring gains for some, but for many working families the Budget is a wolf in sheep’s clothing,” said TUC general secretary Frances O’Grady in response to the analysis. “These households will find that their tax credit losses are much larger than any gains from higher pay.”

A single mum with two children would actually lose less out of work than if she had a low-wage job, IFS welfare expert Andrew Hood explained. After the changes to tax credits, her tax credits would be reduced by £1,340-a-year out of work and £1,790-a-year in work.

A couple in full-time work on the minimum wage with two children will gain £1,560, but lose over £2,200 from cuts to tax credits. “This is an interesting decision by the Chancellor,” said Mr Hood. “The biggest cut he made to tax credits only affects working families.”

The Chancellor also came under fire from the IFS for robbing more from the poor than from the rich. Some families could lose a shocking £6,000 a year after the benefit cap was reduced from £26,000 to £20,000 outside London.

 In addition, nearly half a million people will see their employment support allowance cut by £29 a week. Mr Johnson added: “Given the array of benefit cuts it is not surprising that the changes overall are regressive — taking more from poorer households than richer ones.”