'Few winners' from tax changes help

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Chancellor Alistair Darling has pledged to help the two main groups hit by the move: pensioners under 65 and younger workers on modest incomes with no children.

Extra cash will go to the pensioners through the winter fuel allowance with younger workers helped through changes to the tax credits and the minimum wage.

Analysis of the options by the Social Market Foundation thinktank however, found the only affordable package would cover just 15-20% of those affected.

SMF chief economist Ian Mulheirn said making good the losses of those being targeted would cost more than £4 billion - compared to a sub-£1 billion cost for the proposed package.

He also warned of possible knock-on effects on youth employment of a significant rise in the minimum wage and said a blanket addition to fuel payments would not be cost effective.

The report however also said last year's Budget, which contained the change, had most benefited the poorest fifth of the population with low-earning families gaining "substantially".

"From a lifecycle point of view, the 2007 Budget represents a substantial improvement in the tax benefit system for the less well-off, even many of those who lost out on the first day of the tax year," it concluded.