Low-income families could lose hundreds of pounds a year under controversial Coalition moves to slash council tax benefit payments.

Ministers have ordered widespread cuts to the benefit to save the Treasury £500m a year – but have told councils they have to decide who will lose the money. Council chiefs, including senior Tories, have denounced the reductions which will come into force in April, protesting that they will leave them facing impossible decisions over where the axe should fall. The Independent understands they have raised the issue with ministers.

About six million people currently have all their council tax paid or are given some money towards it. The average payment is almost £16 a week. From April, the amount of money the Treasury will give to town halls to redistribute as council tax benefit is being cut by 10 per cent.