Chancellor of the Exchequer George Osborne (C), flanked by PM David Cameron (R) and Home Secretary Theresa May
Chancellor of the Exchequer George Osborne (C), flanked by PM David Cameron (R) and Home Secretary Theresa MayReuters

MPs have approved plans to cut spending on tax credits despite fierce opposition from Labour and the SNP by 35 votes. The Commons agreed to lower the earnings level above which tax credits are withdrawn from £6,420 to £3,850 and speed up the rate at which the benefit is lost as pay rises. The motion was passed by 325 votes to 290.

Treasury minister Damian Hinds said eight out of 10 households would be better off by 2018-9 as a result of measures announced in the Budget to introduce a national living wage, further increase the personal tax allowance and extend childcare subsidies.

"For too long in this country, low pay has been addressed not by genuine reform and driving productivity but by subsidising the tax credit system," he said.

"The changes introduced in this order will build on the last parliament's reforms and return real-terms tax credit spending to the level it was in 2007-08 - a decade into the tenure of the government of the Labour Party."

During a debate lasting over an hour and a half in the Commons, Labour claimed three million families face losing an average of £1,000 a year from next April, calling it an "ideological attack" on working families.

Seema Malhotra, Labour's shadow Treasury minister said the changes were being "sneaked through the back door".

"This is a political decision made by the chancellor that is set to see over three million families lose an average of £1,000 a year," she said. "It is ideologically driven, it is cynical and it will directly increase levels of poverty in Britain."

"It is part of an ongoing attack on the incomes of some of the most hard working families in our constituencies - those very strivers the chancellor purported to support."

Frank Field, a Labour former welfare reform minister, also insisted the issue would "rumble" and "catch fire" in the constituencies when the cuts are made.

Ian Murray, the shadow Scottish secretary, said the tax credits cuts would damage the Tories in Scotland. In a statement after the Commons vote he said: "In one move, the government have cut the incomes of hard working people across Scotland. This tells you everything you need to know about this government. The people who will suffer after today's decision are working people, who get up every morning and do the right thing.

"David Cameron's spokesperson in Scotland – Ruth Davidson – will need to justify to hundreds of thousands of people across Scotland why her party has pushed these changes through.

"Tax credits were a big achievement of the last Labour government, lifting thousands of people out of poverty and giving working people higher incomes. The Tories didn't make one mention of these changes in their manifesto at the election, choosing instead to only reveal these proposals after the election."

Reports before the vote suggested around five Tory MPs were planning to vote against the government's proposals, which faced concerted opposition from Labour, the SNP and other smaller parties.