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Some couples will be hundreds of pounds better off if they quit their jobs and stay on benefits, Chris Grayling admits.
The employment minister said that as a result of cuts to working tax credits, thousands of families would be £728 a year better off.
From next month, families with members working between 16 and 24 hours a week will no longer qualify for working tax credits of £3,870 a year.
The changes are expected to affect 212,000 couples with children.
In an answer to Labour MP Ann Coffey, Mr Grayling said that some of that group will be better off on benefits. The weekly income of a couple with two children will drop from £330 to £257.
But their income would have been £271 a week had they been unemployed and remained on benefits, The Times reported.
Shadow work and pensions secretary, Liam Byrne, described the disclosure as “staggering.”