Chancellor George Osborne has introduced "stealth" welfare measures that will leave the poorest worse off, it was claimed today.
Analysis of the autumn statement found millions of claimants will be hit by a reduction in the amount they can earn before their Universal Credit payment is withdrawn by 2017.
The Resolution Foundation said official estimates about changes to the much-criticised Universal Credit system that is being introduced will save the Treasury £600 million, with most of the savings coming from a reduction in work allowances - the amount of money a claimant can keep before their benefits begin to be withdrawn.
Work and Pensions Secretary Iain Duncan Smith's reforms are aimed at ensuring work pays more than claiming benefits.
But the think tank warned that while the current cash level for the work allowance will be maintained for three years from April 2014, Office for Budget Responsibility forecasts expect the CPI inflation rate to go up by 8.7% meaning the allowance is set to fall in real terms.
It claims that, taken alongside other measures announced in recent years, such as changing the way most working-age benefits and tax credits are uprated, it will mean a single parent household will be up to £420 per year worse off, while a couple with children face losing £230 a year.
Gavin Kelly, chief executive at the Resolution Foundation, said: "The decision to reduce the work allowance in Universal Credit by not uprating it with inflation will be a real blow to the working poor. It's the sort of stealthy measure that often attracts little attention but still has a real impact. Reducing work incentives and family incomes in this way is bad policy - it's also directly at odds with the government's stated and laudable objective of making work pay.
"Universal Credit was originally conceived as an attempt to simplify a number of benefits with the principle of supporting work at its heart. Over time this is being chiselled away by a series of cuts that are altering the policy's character well in advance of it coming to fruition."