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Page last updated at 08:44 GMT, Tuesday, 22 June 2010 09:44 UK

Budget 'will scale back tax credits'

The Chancellor George Osborne is set to announce the coalition's first Budget today, and is expected to unveil the toughest package of tax increases and spending cuts in a generation.

Speaking on the Today programme, Moneybox presenter Paul Lewis predicted that millions of families will see their child tax credits "undoubtedly scaled back", from the current joint income threshold of £58,000 to a new system which will see them fade out at £30-32,000.

Asked whether introducing means tested child benefits could be on the Budget agenda, he said "it certainly could happen," but that such a move would mean recipients could lose the benefit if their income rose.

"It may seem silly to give it to millionaires," he commented, "but taking it away from them can only be done if you make that difficult choice for low income families".

In Ireland, public sector pay workers have seen their incomes slashed by 20% and cuts in child benefits of 8 to 9%, Europe correspondent Jonny Dymond told the programme.

He said that, across Europe, governments have adopted the same budgetary pattern: "It is the public sector over and over again that is targeted by politicians looking for savings."

"This is an astonishing change," with governments "taking huge u-turns" on policy, including raising the pension age in many countries.

Over the next six months, governments will be intently monitoring their new austerity measures, which will need to "reassure markets" that deficits will come down, he added.

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