Budget to make a million poor households better off

Change to universal credit will bring extra £420 a year to poorest families

- Patrick Butler

More than a million of Britain's poorest households will be £420 a year better off on average as a result of change to universal credit to be announced in next week's budget.

The measure is intended to primarily help the worst-off families, and will be seen as a way for ministers to head off criticism over decisions to cut winter fuel allowance for most pensioners and maintain the two-child benefit cap.

"It's a downpayment on poverty reduction. It is unacceptable that people are in this kind of deep poverty, and this is a small victory in for people in deep poverty," one Whitehall source told the Guardian.

Separately, the Treasury said it would boost social housing with an additional £500m for the government's affordable homes programme.

The universal credit measure, called the "fair repayment rate", is expected to come into force next April and will cap the amount that can be cut from benefit payments each month to repay short-term loans and debts.

It was welcomed by the charity Save the Children UK, which described the current level of benefit deductions shouldered by the poorest families as unfair and unsustainable.

Ruth Talbot, Save the Children UK's policy and advocacy adviser, said: "It is bold thinking from ministers and we know it will have a significant impact for families and put more money in their pockets for food, toys, clothes and books."