FAMILY benefits will be cut after the Abbott Government was successful in passing $2.7 billion in Budget savings this morning.

The legislation passed the House of Representatives with the support of the Labor Party, which supported tightening of the means test for Family Tax Benefit Part B, among smaller cuts such as ending indexation for the clean energy supplement.

On ice will be tough new work-for-the-dole measures that deny assistance to job seekers for six months, and changes to the pension and family payments.

The measures will salvage about $2.7 billion in savings, but has been portrayed as a “humiliating backdown” by opposition families spokeswoman Jenny Macklin.

“I think it just demonstrates their complete and utter incompetence,” she told ABC Radio.

“Labor was never going to support any legislation that had cuts to the pension, these massive cuts to families, we were never going to support putting young unemployed people in a position where they had nothing to live on for six months.”

Treasurer Joe Hockey says he may be forced to look at new savings in December’s mid-year budget review because of the Senate gridlock, to pay for tougher counter-terrorism measures and Australia’s involvement in Iraq.

Labor’s finance spokesman Tony Burke said further cuts to foreign aid would be “unwise” in the current climate.

“Foreign aid can be one of the extraordinarily powerful weapons ... against extremism,” he told Sky News.

“Given the nature of the conflict we’re involved in, given the nature of the extremism that people are dealing with, continued cuts to foreign aid can have some very perverse outcomes and the government should be very mindful of that.”

Foreign Minister Julie Bishop disputed the report in The Australian on a further foreign aid freeze.

“That report’s not correct; there has been no discussion in cabinet along those lines,” she told ABC radio.

“We will abide by the commitments we made in relation to foreign aid.” Prime Minister Tony Abbott said the government had already made “reasonable changes” to aid spending.

“I’m confident that we’re doing exactly the right thing in this region and elsewhere,” he told reporters in Melbourne.