Autumn Statement 2012: £5.8bn axed from welfare spending

The attack on benefit claimants was one of the biggest money-saving measures in the Autumn Statement.

Most working-age benefits - including jobseeker's allowance, employment and support allowance (ESA) and income support - will be subject to the 1 per cent cap over the next three years.

So will elements of the child tax credit and working tax credit.

Child benefit will continue to be frozen next year then rise by 1 per cent in 2014 and 2015, when there will also be a 1 per cent rise in the level of earnings ignored when calculating universal credit.

The local housing allowance rates - which go towards calculating housing benefit - will rise in line with existing policy next year before also being capped in 2014 and '15.

Mr Osborne claimed it was "fair" that welfare recipients should get the same income increase as public-sector workers, who are getting a 1 per cent rise as a lengthy pay freeze comes to an end.

TUC leader Brendan Barber said: "This Chancellor has presided over one of the biggest ever squeezes on the budgets of working families.

"Small gains on fuel and the personal allowance are dwarfed by the swingeing cuts to child benefit and tax credits that many millions of families rely on to get by."

Communication Workers Union leader Billy Hayes savaged a "1930s-style Budget statement which rewards the rich with a tax cut while reducing benefits in real terms for the vulnerable."

Mental health charity Mencap said it was "seriously concerned" at the cap on ESA.

Spokesman Dan Scorer said: "This means a further reduction in support for sick and disabled people.

"Mencap believes this is unfair and will create increased hardship. ESA is designed to support disabled people preparing for work and those judged too sick or disabled to ever work."