'No U-Turn on benefits cap' says Government

Work and Pensions Secretary Iain Duncan Smith today denied the Government was preparing to dump a proposed £26,000 annual cap on benefit payments in the latest of a series of policy retreats.

Welfare reform minister Lord Freud fuelled expectations that the policy would be softened when he detailed a series of exemptions from the proposed cap yesterday.

Liberal Democrat members of the coalition are understood to be uneasy about the handout limit, set by Chancellor George Osborne at the level of the average income of a working family.

But Mr Duncan Smith today denied there had been any U-turn.

"The benefit cap will restore fairness to the taxpayer and fairness to those who do the right thing on benefits," he said.

"The policy is unchanged. The £26,000 benefits cap remains."

Mr Duncan Smith's comments were echoed by Downing Street, where a Number 10 spokesman confirmed that the policy was "unchanged" and the cap level was being kept.

Unveiling the proposed limit last year, Mr Osborne said it was not fair that 50,000 families received more in handouts than "the average family gets from going out to work".

But there were warnings that the policy could drive thousands of people out of their homes, particularly in expensive areas such as London.

Speaking on the BBC's Politics Show, Lord Freud indicated that the Government was investigating ways of reducing the impact.

"We have got quite a lot of protections in this cap," he said.

"Firstly of course, if you are in work, you are not affected.

"Secondly if you're a disabled person or there's a disabled person in the household, you're not affected.

"If you're a war widow or a widower, you're not affected."

He added: "We're also looking currently at exceptional circumstances which some people may find themselves in and we're going to be putting out arrangements for that later in the year."

Asked what form the arrangements could take, the peer replied: "Wherever we think that there's something happening that is undesirable and we're looking very carefully at how to draw up those protections."

A spokeswoman for the Department for Work and Pensions said: "We have always said that we wanted to look at the sort of help available for those people in particularly difficult circumstances.

"However, the point of the benefit cap is to set a limit as to what people can expect from the system when they are not working.

"The Government believes it is not fair that people who are in work can earn less than those who are on benefits."