Meloni unveils tax cuts and labour market reforms on 1 May.

The Italian government on Monday approved a decree that scales back welfare benefits for the poor and unemployed, as well as unveiling tax cuts for low-income earners and making it easier for businesses to hire workers on short-term contracts.

The measures were part of a package of labour market reforms announced by premier Giorgia Meloni following a cabinet meeting on International Workers' Day.

The "reddito di cittadinanza" or citizen's income scheme that the government is scaling back is a monthly allowance for families and individuals with low income, designed to help with basic expenses such as food, bills and rent.

The subsidy has long been in the sights of the right-wing coalition government led by Meloni, amid claims that the welfare programme is subject to abuse and discourages people from seeking employment, particularly for low-paying jobs.

Meloni said that from next year the subsidy will be divided into two separate benefits to distinguish between "those who can work and those who cannot".

Primo maggio: il Governo festeggia con i fatti. Anche oggi al lavoro per migliorare la condizione dei lavoratori. #1maggio pic.twitter.com/1nJmb14UDl

— Giorgia Meloni (@GiorgiaMeloni) May 1, 2023

The state will subsidise people unable to work due to disability or family commitments, with monthly payments of up to €500, while those deemed fit to work will have their benefits reduced, to a maximum of €350 a month, and will be required to attend employment training programmes.

Under the 1 May reforms the government will introduce tax cuts, from July to December, to benefit those with an annual income of less than €35,000.

In a video message Meloni said she was "extremely proud" of the move which she hailed as "the most important tax cut in decades", claiming that it would boost pay packets for low earners by up to €100 a month.

The reddito di cittadinanza is a flagship policy of the Movimento 5 Stelle party whose leader Giuseppe Conte was Italy's prime minister when the scheme was introduced in 2019.

Conte slammed the Labour Day reforms on Monday, claiming the measures would "cost the already poor and underpaid workers dearly".

Elly Schlein, leader of the centre-left Partito Democratico, blasted the government's efforts to make it easier to hire workers on short-term job contracts, claiming the move "steals the future from the next generations."