Battle over plan to cap benefits ahead of Commons vote

Increases in benefits have cost £6.3bn since the start of the 2008 recession, Iain Duncan Smith says

It is unfair for benefits to rise at a faster rate than wages, the work and pensions secretary has said ahead of a key Commons vote on capping benefits.

Figures highlighted by Iain Duncan Smith show jobless benefits rose 20% in the last five years, compared with an average 12% rise in private sector pay.

He said benefits should no longer automatically increase with inflation.

But Labour opposes the cap and said jobseekers allowance had failed to keep pace with wages over the past 10 years.

MPs are due to debate legislation on Tuesday which is designed to break the link between benefit rises and inflation.

Instead there will be a three-year cap of 1% - which is below the expected rise in the cost of living - on most working-age benefits and tax credits for three years from 2013/14.

Child benefit, housing benefit and universal credit will be capped for two years from 2014/15.

Labour, which will fight the 1% cap, says that jobseekers allowance has risen by 32% over the past decade, whereas wages have gone up by 36%.

'Tightening belts'

These are not new figures from either the government or the Labour Party.

BBC political correspondent Ross Hawkins said: "Both sides know it's vital for them to persuade the public at large that they have got this right."

Chancellor George Osborne told MPs in his Autumn Statement last month that the incomes of those on out-of-work benefits had risen "twice as fast as those in work" over the last five years.

Mr Duncan Smith said that working families had been tightening their belts after years of pay restraint while watching benefits rise - and that, he said, was not fair.

Increases had cost the taxpayer £6.3bn since the start of the 2008 recession, he said.

"The welfare state under Labour effectively trapped thousands of families into dependency as it made no sense to give up the certainty of a benefit payment in order to go back to work.

"This government is restoring fairness to the system and universal credit will ensure it always pays to be in work."

Shadow work and pensions secretary Liam Byrne said cuts to tax credits had pushed millions of working families into poverty and now meant thousands of part-time workers were "better off on benefits".

'Not justified'

Mr Byrne told BBC Radio 4's The World at One: "The lion's share of the savings from this bill will actually come from people's tax credits - on top of the £14bn that has already been carved out of tax credits, this bill is going to take about another £4bn out.

"Now that's going to hit hard-working people very hard and at a time when you're giving a £40,000 tax break to Britain's millionaires, that just doesn't seem justified."

He said Labour would reverse the cut in the top rate of income tax from 50p to 45p.

But Conservative Party chairman Grant Shapps told the same programme the top rate tax cut was a "red herring" and pointed to the removal of millions of people on lower pay from income tax.

He said taxpayers should not feel that they are having to pay for people on benefits to get a higher increase than people actually working.

"This is an argument about fairness and what Labour need to work out is if they're going to say: 'Well, we don't agree with this, we think that these benefits should carry on going up twice the speed of average earnings'. That's fine. How are they going to pay for it?"

As tensions rise ahead of the vote next week, Lib Dem leader and deputy PM Nick Clegg also entered the debate, telling The Times that Labour was "learning the tricks of opposition" but "to oppose everything is to offer nothing and the country will not be duped".

He said opposing the 1% benefits cap meant Labour "believe welfare claimants should see a bigger rise than the 1% that public sector workers will get on their wages - which they support".