UK Markets open in 2 hrs 33 mins

Benefits Cap Vote On George Osborne's Plans

(c) Sky News 2013

Work and Pensions Secretary Iain Duncan Smith has accused Labour of bribing voters with tax credits during a bitter debate about the 1% cap on benefit payments.

Mr Duncan Smith attacked the Opposition for criticising legislation to sever the link between welfare handouts and inflation in a fiery Commons session.

He claimed the previous government had created a system in which nine out of 10 families with children could claim tax credits, including those on £70,000-a-year.

"They think that helping people is about trapping more and more people in benefits," he told MPs ahead of a vote on the controversial move later.

"The result of all of this is that the debt we all had to pay off was costing us £30,000 every single minute," Mr Duncan Smith said.

He accused Labour of failing to face up to the need to slash the deficit, pointing out the party had opposed £83bn of savings set out by the Government.

"That's the equivalent of adding another £5,000 of debt for every working family in the country," he said.

But shadow work and pensions secretary Liam Byrne claimed the coalition's approach was turning into a "hit and run on working families".

He accused Chancellor George Osborne of "battering the life" out of the economic recovery and Mr Duncan Smith of living "in a fantasy land".

"The Tory way is to hit working families. The Labour way is to help people work," he told MPs.

MPs will vote on the cap following the heated debate and Labour as well as some Lib Dem rebels are set to vote against it.

What amounts to a real-terms cut will hit most working age welfare payments and tax credits, including jobseeker's allowance and maternity pay.

The Government insists it is unfair that state handouts have been rising twice as fast as wages during recent years of austerity.

But Labour argues that the move will mostly affect people who are actually in work, citing analysis that shows seven million working households will lose £165-a-year.

Shadow chancellor Ed Balls said: "While millionaires get a tax cut, seven million striving working families are paying the price for David Cameron and George Osborne's economic failure.

"The best way to get the benefits bill down is to get the economy growing and people back to work, not hit striving families."

Mr Duncan Smith, appearing earlier on Sky News, condemned the Opposition's stance as "pathetic", "unrealistic" and "ridiculous".

"We have to still continue to try and tackle the deficit left for us by Labour which is fuelling huge borrowing and will cost taxpayers enormously unless we get it under control," he said.

"It is also about trying to do it in a way that is fair to those who are in work and are paying the taxes for those who are on welfare.

"The reality is they have seen their welfare payments rise far faster over the last six or seven years than anybody in work."

Labour was "a pathetic opportunistic group who spend their time trying to pretend to people there are soft options out there", he added.

However, anti-poverty campaigners have warned that families will increasingly struggle to properly feed children if benefits fail to keep pace with rises in the cost of living.

Former children's minister Sarah Teather has already broken ranks, warning the the measure would make poverty "significantly worse" and accusing Mr Osborne of "playground politics".

She has now been joined by South Manchester Liberal Democrat MP John Leech, who said he found the Tories' language "objectionable".

"I strongly support raising the tax threshold for low paid workers, but this cut will wipe out much of that good work," he said ahead of this evening's Second Reading division.

Meanwhile, the Tories are trying to distance themselves from the "skivers against strivers" rhetoric sparked by Mr Osborne's original announcement.

Conservative MP Sarah Wollaston insisted that the "vast majority" of her party did not use those terms and it was not how they "feel generally".

The  Institute for Fiscal Studies (IFS (SES: E1:I49.SI - news) ) has estimated seven million working families will be £165 worse off a year, compared to £215 for the 2.5 million workless households.

Mr Duncan Smith says the £165 figure only reflects the benefits cap and claims working families will actually be £125 better off each year due to the rise in the income tax threshold.

More From Sky News