State pension cap planned by Labour, Ed Balls says

The government is guaranteeing annual rises in pensions of at least 2.5%

Labour has said spending on state pensions is likely to be included in its proposed cap on welfare budgets.

Shadow chancellor Ed Balls told the BBC "at the moment" Labour intended to factor pensions into its calculations for a three-year cap from 2015-16.

The opposition said it was committed to maintaining the value of the state pension but welfare expenditure needed to be looked at "across the piece".

The Conservatives said the plans would hit hard-working people.

Labour has said an "iron discipline" on spending will be needed if it is returned to power and, as part of a new approach to welfare, it would seek to cap the amount spent on so-called structural benefits spending.

This would see a limit on welfare that does not directly depend on the ups and downs of the economic cycle, including housing benefit and incapacity benefit.

The idea mirrors one first put forward by Chancellor George Osborne, although neither the government nor the opposition have yet to say at what level the cap would be set.

'Triple lock'

Mr Balls told the BBC's Sunday Politics: "George Osborne is going to announce his cap in two weeks time. I don't know whether he will exclude or include pensioners spending. At the moment our plan is to include it."

The shadow chancellor said it was not the case that a future Labour government would have to cut the value of the state pension in order to ensure any welfare cap was not breached.

But he said including pensions, which forms the largest part of the multi-billion pound structural benefits bill, made sense.

"Look across the whole welfare state and ask what are the drivers of expenditure," he explained.

"I think many people watching your programme will not realise that actually today the clear large bulk, most welfare spending is in fact going to people over 60. That is the truth. We should look across the piece."

Labour insisted it supported the so-called "triple lock" on pensions introduced by the coalition, which guarantees the state pension will rise by whichever is highest out of inflation, average earnings, or 2.5%.

Treasury Minister Sajid Javid said: "Now we know when Labour say they want to cut welfare, what they actually mean is cut the basic state pension."

And Conservative MP James Wharton tweeted: "Labour plan to cap pensions spending, really? Hitting those who've worked hard all their lives."