Benefit cuts for children, the disabled and the homeless are to form the first battleground for the coalition in its struggle to find more than £60 billion in public spending reductions.
The Liberal Democrats and Conservatives have both agreed to withdraw hundreds of pounds a year from middle-income families under plans to cut child tax credits and the Child Trust Fund. But the Lib Dems are resisting Tory plans to go farther. Conservatives want to cut benefit bills for the long-term sick by getting more into work with stricter medical tests.
The Lib Dems are also opposed to options drawn up by Treasury officials to means-test or tax child benefit for more affluent families, to means-test or tax disability and carers allowances, and to reduce housing benefit, which could raise more than £10 billion.