George Osborne will claw back £1600 from working families despite his

The director of the independent economic thinktank the Institute of Fiscal Studies warned there was only a “50-50” chance of the revenue forecasts remaining so positive.

The borrowing forecast for this year was cut from £74.1 billion to £73.5 billion, with the Government predicted to achieve a surplus of £10.1 billion in 2019/20 and £14.7 billion in 2020/21.

He said he would still be able to deliver the promised £12 billion in welfare cuts over the next five years while balancing the books by the end of the Parliament.

Outlining his spending review in the House of Commons today, George Osborne said the proposed £4.4bn in tax credit cuts – which has caused an outcry across the country – could be shelved due to an improvement in public finances.

The IFS calculated that working age benefits will be cut to their lowest level as a share of national income for 30 years. He also pointed out that the government’s commitment to health spending was tiny by historical standards.

“There will be no cuts in the police budget at all, there will be real terms protection of police funding”, he added.

A Department for Communities and Local Government spokesman said: “In reality councils will have nearly £200 billion to spend on local services over the lifetime of this Parliament, a cash terms increase and a reduction of just 1.7% in real terms each year”.

He said Office for Budget Responsibility forecasts showed GDP growing “robustly every year”, living standards rising and more than one million extra jobs being created over five years.

“Why? Because the equivalent cuts to Universal Credit, now legislated, were left untouched”, he said. “The gap with what one might have expected, based on the Conservative manifesto, is substantially greater”.

About 2.6million working families will still be stripped of £1600 a year from their household budgets despite the Chancellor’s decision to abandon tax credit cuts in his Autumn Statement.

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The IFS also pointed out that Osborne’s measures amounted to a “tax-raising budget” with the new apprenticeship levy, changes to council tax and new stamp duty rules for second homes and buy-to-let properties.

The IFS said some of the biggest losers would be families where both parents work on low incomes and who own their own home. “The long-term generosity of the welfare system will be cut just as much as was ever intended”.

The planned consolidation of a number of benefits into a single Universal Credit “will now involve 2.6 million working families being an average of £1,600 a year worse off than they would have been under the current system, while 1.9 million will be £1,400 a year better-off”, he said.

The source said: “It is a static analysis that does not take into account behavioural change, or other changes such as the new childcare offer”.

There are two main types of tax credits available to people in the United Kingdom: working tax credits and child tax credits.