By Jonathan Moore and Alex Stevenson
Child benefit will be frozen for the next three years, the chancellor announced in his Budget today.
It was included in a raft of measures announced by George Osborne to tackle the costs of tax credits and also included a policy to reduce credits for families earning more than £40,000 a year.
However, the chancellor also said that the child element of child tax credits would be increased by £150 above indexation each year.
From 2011 - with the exception of state pensions and pension credits - benefits, tax credits and public service pensions will rise in line with the consumer price index (CPI) rather than the generally higher retail price index (RPI).
There will be a reform of housing benefit which will limit it to £400 a week, saving £1.8bn a year by 2014/15.
He announced his total welfare reductions would reduce costs by more than £11 billion each year.
The coalition's approach to welfare was outlined by new work and pensions secretary Iain Duncan Smith last month.
He argued "radical changes" were needed after Treasury statistics showed 1.4 million people had been on out-of-work benefits for nine or more of the last ten years.
Today's announcements were welcomed by children's charity Barnardo's, who said the removal of benefits for higher earners was a positive move.
Barnardo's chief executive Martin Narey said: "There's some pain in this Budget for the poorest families, but we recognise the government has done what it can to protect the most vulnerable.
"Our calls for child tax credits to be redirected away from more wealthy families to the poorest have been heard - an action we highly commend."
Plans to cut handouts for the better-off, including child tax credits and child benefits, risk undermining the coalition's unity, however.
Left-wing Liberal Democrat MP Bob Russell told the Mail on Sunday newspaper he was not prepared to walk away from his constituents who needed help from the state, however.
"I supported the formation of the coalition through gritted teeth but I have never voted for big cuts in welfare benefits and I am not going to start now," he pledged.
Both the Liberal Democrat and Tory manifestos argued it was not necessary to maintain benefits for those in middle-earning income brackets.