Ministers defiant over benefit cap

The Government last night insisted it would push through its plans for a benefits cap despite suffering a stinging parliamentary defeat at the hands of Church of England bishops.

Work and Pensions Secretary Iain Duncan Smith wants out-of-work payments limited to £26,000 a year per household, which he claims will save “something in the order” of £600m towards deficit reduction.

But a bid by bishops – backed by former Liberal Democrat party leader Lord Ashdown – to exempt child benefits from the calculation was backed by a majority of 15 in the House of Lords.

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The Government admitted it was “disappointed” by the result but insisted it still intends to push through its plans “in full”.

A Department for Work and Pensions spokesman said: “We are very disappointed by this decision and it clearly flies in the face of public opinion.

“There has to be a limit on the amount of money benefit claimants can receive.

“We think that limit is set at a fair rate of £26k – the equivalent to someone earning £35,000 before tax, a salary that many working families would be happy to receive.

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“If you take child benefit out of the cap it will simply become ineffective, failing the very principle of our reforms, which is to bring fairness back into our welfare system while ensuring that support goes to those who need it.

“We are determined our reforms will be implemented in full and we will take this back to the House of Commons to reverse tonight’s decision.”

Around 67,000 families will lose £83 a week under the cap, which is due to be brought in from 2013 in England, Scotland and Wales.

Prime Minister David Cameron insisted it was a “basic issue of fairness”.

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“It’s time to call time on these excessive welfare payouts,” he added. “That’s what the benefit cap will do.”

But Lord Ashdown, a loyal supporter of the coalition, joined 25 other Lib Dem peers to rebel against the plans.

He said that as president of the United Nations children’s agency Unicef, he was not prepared to back the reforms, denouncing them as “completely unacceptable” in their current form.

Despite the divisions in his own ranks however, Deputy Prime Minister Nick Clegg has said he is fully signed up to the changes.

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Labour decided to back the bishops’ amendment despite supporting the principle of a benefit cap, insisting it would allow additional safeguards to be put in place when the proposals return to the Commons.

The party’s own amendment – exempting those at risk of homelessness from the cap – was defeated by 250 votes to 222.

The Government defeat was welcomed last night.

Enver Solomon, policy director at the Children’s Society, said: “The Lords have stood up to the Government and sent a clear message in support of children up and down the country.

“The Children’s Society is delighted that the Lords have seen sense today and excluded child benefit when calculating the benefit cap.

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“Children should not be held responsible and penalised for the employment circumstances of their parents.

“Child benefit is a non-means tested benefit paid to working and non-working families.

“It’s a benefit all households with children are entitled to and is there to help with the cost of having children.

“If the intention of the benefit cap is to promote fairness, it is totally unfair that a small family with a household income of £80,000 a year receive it, yet a large family with a benefit income of £26,000 are excluded.

“The Government must not ignore the fact that the Lords have spoken out to defend the plight of some of the country’s most disadvantaged children.”