Labour to vote against below-inflation rise in state benefits

Labour will adopt the high-risk strategy of voting against below-inflation rises in most state benefits in the Commons in the new year.

George Osborne’s decision to raise most benefits by 1 per cent for three years in last week’s autumn statement was seen as a “trap” for Labour. Some Labour MPs are worried that opposing the move will allow the Conservatives to attack Labour as “on the side of the scroungers, not the strivers.”

But Ed Balls, the shadow Chancellor, told MPs yesterday that 60 per cent of the families affected were in work because the squeeze also applies to tax credits, which top up the incomes of low earners. He said: “We will look at the legislation but if he [Mr Osborne] intends to go ahead with such an unfair hit on middle and lower income working families while he is giving a £3bn top rate tax cut we will oppose it. Why is he making striving working families pay the price for his economic failure?”

Last night Labour claimed the £3.7bn welfare cut could cost the Tories the next general election. The Opposition issued figures from the House of Commons Library showing that the 50 most marginal Tory-held seats have an average 6,846 families in work and receiving tax credits. There are an average of 15 such families for every marginal voter.

A Labour source said: “Everyone knows that the next election will be a ‘living standards’ election. George Osborne’s strivers’ tax is going to hit thousands of working families in Tory marginals across the country. He thought he was playing a clever political game but he could have cost dozens of his colleagues their seats.”

Labour cited figures from the independent Institute for Fiscal Studies showing that last week’s mini-budget would leave an average one-earner couple £534 a year worse off by 2015.

But Mr Osborne said: “Of course tax credits go to some people in work, but we are also helping those people with a personal allowance increase, and working households are £125 better off.”

Grant Shapps, the Tory chairman, said: “Labour just don't get it on welfare. First they voted against our benefit cap - where no one can get more in benefits than the average working family - and now they oppose our tough but fair plan to save more money from the benefits bill.”

He added:”With pay restraint in business and in government, benefits have risen twice as fast as pay since the crisis began. So it's fair to make savings from the benefits bill to cut the deficit.Labour's plan for more borrowing and more debt to fund higher benefits isn't fair or credible.“