The Welfare Cuts Explained In Seven Graphs

George Osborne has to find a significant amount of savings and he will be looking to the welfare budget to do it.

Here, in graphs, we explain what he needs to do and how he might do it.

1) The Government has said it is going to eliminate the deficit by 2018-19.

The Chancellor tells us he is "fixing the roof while the sun is shining" - although the sunniness of the sun has been the subject of some debate.

Anyway, in short, the hole in the roof is pretty big and fixing it is a pretty tall order.

The Institute for Fiscal Studies says he will need to find £37.6bn savings (or cuts as they are also known) between 2015-16 and 2018-19. It's quite a lot of money.

NB Government deficit = amount per year of spending more than we earn as a country. Government debt = the amount the country owes in total

2) As the nation's housekeeper-in-chief, David Cameron says the country needs to live within its means.

He says the country needs to save/cut £30bn to get rid of the deficit by 2018-19. That, he says, means saving £1 a year in every £100 that the Government spends.

He has told us in January: "I don't think there's a family or business that couldn't do that."

On that basis, it is the equivalent of saving around a fiver a week of the average household spending – or two lattes. Although most economists will tell you it is not possible to equate Government spending to household spending.

3) Put that way it doesn't sound much, but when you apply it to Government spending, it is.

Mr Osborne has said he will be finding £12bn of those cuts from welfare – which accounts for around 25% of public sector spending.

4) So what in the welfare spend is the most vulnerable? Pensions take the biggest chunk but they have been protected.

Instead David Cameron has said he wants to end the "ridiculous merry go round" of taxing low earners to pay it back in benefits - indicating a raid on tax credits.

These are in-work benefits for the worst-paid in society. They were ramped up by Gordon Brown as an incentive to work but have seemingly ended up subsidising a low-wage culture.

5) And it is easy to see why tax credits would be the obvious target. They make up nearly 14% of welfare spending – just shy of £30bn. Compare that to unemployment benefits – Job Seekers' Allowance costs just £2.5bn a year.

Mr Cameron's argument is that if you take away the tax credits that subsidise low wages, employers will have to pay more.

Cutting tax credits is unlikely to encourage employers with a history of paying low wages to increase them, but if it was accompanied by incentives for firms to pay a living wage, or even a significant minimum wage increase, it might soften the blow.

6) Four and a half million people claim tax credits with an average claim of £6,340 a year.

There are two kinds of tax credits – working tax credit and child tax credit. You're eligible for tax credits if your annual household income is less than £32,969.

Child tax credit claimants get £545 a year plus up to £2,780 per child.

To claim working tax credit, claimants must work at least 16 hours a week if single, 24 hours a week if a couple with children and 30 hours if they are a couple with no children. The basic is £2,010 a year.

The maximum claim is around £24,000 – but you would need to be a single parent with three children working 16 hours a week on the minimum wage.

The IFS has suggested the Government could target tax credits by returning them to 2003 levels.

This, say its economists, would hit 3.7m people and see them lose around £1,400 a year.

It would, however, be worth £5bn of the £12bn welfare cuts Mr Osborne needs to find. That's a good chunk.

7) And the other target? Well housing benefit looks likely. It makes up 11.8% (£26bn) of welfare spending and it’s increased. Mr Osborne has suggested abolishing the benefit for under 25s.

That would bring in £1.5bn, the IFS has estimated.