Labour Accused Of £11bn Black Hole

Labour have been accused of creating an £11bn black hole because of their opposition to a 1% cap on benefit rises.

Tory chairman Grant Shapps challenged Labour to explain how they would pay for the gap in spending plans, which he said amounted to £700 from every UK working household in the three years following the 2015 general election.

But Labour said Mr Shapps's claims were "desperate nonsense", saying that it will not set out its tax and spend plans for the next Parliament until nearer the time.

The cap, announced by Chancellor George Osborne in his Autumn Statement earlier this month, will break the traditional link between benefit rises and inflation and will amount to a real-terms welfare cut if inflation remains around 2%-3% as expected.

Labour has indicated that it will vote against the Welfare Benefits Uprating Bill implementing the cap, which applies to most working-age benefits and tax credits for three years from 2013/14 and child benefit, housing benefit and universal credit for two years from 2014/15.

Figures released with the Autumn Statement show that the Chancellor expects the cap to save around £2.4bn in the period before the 2015 election, and £11.8bn in the following three years to 2018.

Savings continue to be made after the cap ends, because it means that any subsequent rises will be applied to a lower baseline.

Mr Shapps said: "This Government is having to make difficult choices to deal with the deficit, and so it's fair that, when private sector workers are squeezed and we are temporarily limiting public sector pay to a 1% rise, we do the same for benefits as well.

"Labour have indicated that they will vote against new laws to cap benefit rises, so it's clear that a future Labour government would add £11bn to the nation's credit card - just as they built up debts when they were in power.

"We are making progress in dealing with the deficit left by Labour - it's already down by a quarter. But Ed Miliband's plans mean more borrowing and more debt to pay for bigger benefit rises."

But Labour Treasury spokesman Chris Leslie said: "This is yet more desperate nonsense from a Government whose economic plan has utterly failed.

"Labour has not set out any spending or tax commitments for the next Parliament and we will not do so until we know the state of the economy and public finances that we will inherit from this failing Tory-led Government."

The row came as the head of the UK's largest provider of food banks warned that the benefits cap will lead to a rise in homelessness, hunger and crime.

The Trussell Trust estimates that its chain of 250 food banks across the UK will feed 250,000 people this year - a 400% increase since 2010.

Its executive chairman Chris Mould denounced the cash-saving move as "short-sighted" and said it would result in knock-on costs for other Government departments.