Church Action on Poverty has voiced concern over the impact of George Osborne’s Budget one day after a respected think tank warned that financial cutbacks were hitting the poor hardest.

The Institute for Fiscal Studies said the Budget had been “clearly regressive” and was hitting low earners more than those in the upper income brackets.

Niall Cooper, CAP’s Coordinator, said the IFS’s report had confirmed the group’s worst fears that the Budget was hitting those already struggling to get by and least in the position to cope with cuts to income, welfare and services.

“They are people who are already just keeping their heads above water and struggling to keep up with their debt repayments and living costs. They are not people in a position to see their income further reduced,” he said.

“The consequences will be dire for many people. Even a five per cent loss of income may not sound like very much but it is enough to tip some people over the edge. The cuts are creating huge hardship.”

Mr Cooper said the church had a duty to be concerned about people struggling financially and that the Government should instigate cuts in a responsible way.

“We commend the Government’s commitment to fairness and specifically their commitment to protecting the poorest and most vulnerable from the cuts but now they need to follow through on that commitment,” he said.

“We’re not saying that there shouldn’t be any cuts but that they should be borne by those with the capacity to bear them, rather than those already struggling.”

CAP’s warning comes as the Equalities and Human Rights Commission threatens to take the Treasury to court.

The quango claims that the Government has not fulfilled its legal obligation to properly consider the effect of cuts on vulnerable groups, including women, the elderly, the disabled and ethnic minorities.

Its chief executive Neil Kinghan said the Commission’s role was to “ensure fairness is at the heart of decisions”.

Lib Dem leader Nick Clegg defended the Budget against the IFS’s findings, in spite of anger from his own party backbenchers.

Clegg said the report was “partial” and “does not include the things we want to do to get people off benefits and into work”.

Labour leadership contender David Miliband said: “This report reveals George Osborne’s Budget was soft on the banks, hard on the poor.”