Welfare cuts are 'fair and right' says David Cameron

Real-terms welfare cuts are “fair and right”, David Cameron insisted today as he faced Labour accusations the Government was trying to “divide the country”.

MPs voted last night to cap rises in most working-age benefits at a below-inflation 1 per cent for three years - ending the usual link to the cost of living.

Charities which work with poor families voiced dismay at the outcome and there was a small-scale rebellion by some Liberal Democrat MPs.

In clashes at Prime Minister's question time, Opposition leader Ed Miliband attacked the changes, which his party voted against.

"The Chancellor hits hard-working people and the most vulnerable with his 'strivers' tax' but at the same time he is giving a massive tax cut to millionaires," he said.

"You have broken that most symbolic promise that we are 'all in this together"'.

But Mr Cameron said it was "inexplicable" that Labour opposed the squeeze but had supported a 1% pay rise for public sector workers.

"Over the last five years, benefits have gone up by 20 per cent yet average earnings are only up by 10 per cent. So I think it is fair and right to have a 1 per cent cap on out-of-work benefits, a 1 per cent cap on tax credits and, of course, the 1 per cent cap on public sector pay.

"What I think is inexplicable is the position of the party opposite to support a 1 per cent public sector pay cap but to want more for welfare claimants.

"That is not fair, it is not right, and they should think again," he said.

The cap, announced by Chancellor George Osborne in his Autumn Statement last year, is aimed at slashing £5 billion from the welfare bill over the next five years.

Mr Osborne has previously justified it by appealing to workers annoyed at seeing their neighbours blinds closed and "sleeping off a life on benefits" when they go to work.

Critics - including some on the Tory benches - accuse him of portraying the jobless as "shirkers" in a bid to gain public support for the measure.

The row over the impact of the cap on working families has heightened pressure on Mr Cameron to commit to scrap universal benefits for pensioners.

Tory backbenchers are among those declaring it "mad" that well-off OAPs continue to enjoy free bus passes, winter fuel payments and television licences at a time of austerity.

Deputy Prime Minister Nick Clegg has voiced similar concerns and Work and Pensions Secretary Iain Duncan Smith appeared yesterday to hint reforms could be in the 2015 Tory manifesto.

Mr Cameron has repeatedly insisted he will not abandon a 2010 pre-election pledge to protect such perks for the duration of this parliament.

It was reported that a first step being examined by Mr Duncan Smith was the removal of the right to winter fuel payments for UK citizens living in Spain and other warm climates.

The European Court of Justice ruled recently that expat OAPs resident in EU countries have a right to the £100-£300 annual cash boost.

Ending such payments could require the introduction of a "temperature test", the Financial Times said.

Cabinet veteran Ken Clarke suggested the Conservatives were rushed into the promise not to cut benefits for pensioners before the last general election.

He said the issue would be an "agenda item" when they came to discuss the manifesto for the next election.

"Before the election the Labour Party started putting out leaflets accusing us of planning to take away benefits from pensioners," he told BBC Radio 4's The World At One.

"Very rapidly a promise was given that we wouldn't reduce benefits to pensioners. We absolutely tied ourselves down for this parliament.

"I am sure when we get round - which we haven't yet - to contemplating our manifesto, there will be an agenda item."

Mr Clarke also hinted that he did not like the use of the word "shirkers".

"I don't use it. There are shirkers. They will be amongst the people who would benefit from whatever increase the Labour Party is apparently promising if they could ever work out how they could pay for it," he said.

PA