Labour has claimed the Government's welfare policy is "unravelling" after a minister said it might need revising.

Mr Osborne risked a backlash from middle class voters by announcing child benefit would be stripped from 1.2 million households with a parent who earns over around £44,000 from 2013.

It sparked immediate criticism from unions and poverty campaigners and a respected economic thinktank warned it could "seriously distort" work incentives.

Just hours later, Children's Minister Tim Loughton said the thresholds could be adjusted if necessary. That was entirely at odds with officials' insistence the cut-off point had to be aligned with income tax rates to ensure simplicity and avoid complex means testing.

Mr Loughton said: "If there are ways we can look at compensating measures for those genuinely in need that will be looked at in future budgets. If the thresholds need to be adjusted there's plenty of time to look at that."

Seizing on his comments, shadow work and pensions secretary Yvette Cooper said: "The Government's unfair attack on child benefit is now unravelling. The Chancellor only announced means testing this morning, and already the Children's Minister has admitted that the thresholds need to be looked at again."