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Millions face income drop as benefits Bill is passed

Iain Duncan Smith has raised the prospect of cutting pensioners' benefits as MPs backed a real-terms cut in income for almost one million Scots.

Labour's bid to block the Welfare Benefits Up-rating Bill and insist on a "compulsory jobs guarantee" was defeated by 328 votes to 262, giving the Coalition Government a majority of 66.

Ministers have pledged to maintain help for older people, including free TV licences and the winter fuel payment.

But the Work and Pensions Secretary suggested these could be next on the chopping block, although not until after the next Westminster election in 2015.

MPs supported cuts to a range of benefits, including maternity pay, income support and housing benefit in the new legislation, voting for a 1% rise in most benefits over the next three years, a figure well below the expected inflation rate.

Amid stormy scenes in the House of Commons, Mr Duncan Smith vigorously defended the move and accused Labour of having no plan to help the UK out of its economic problems. Labour was in danger of becoming a "laughing stock", he said.

But Labour hit back, accusing the Coalition of a "hit and run" on working families. The Government was repeatedly asked how it could make benefit cuts while giving a tax cut to millionaires.

Some of the criticism came from within LibDem ranks. Former minister Sarah Teather rebelled and warned that attacks on the poor could lead to the "fragmentation" of society.

Two other LibDem MPs joined her rebellion while 10 abstained, including Scots-born transport under-secretary Norman Baker, former energy secretary Chris Huhne and MP for Argyll & Bute Alan Reid.

Among LibDem MPs to condemn the rhetoric of the debate over the cap, with the Chancellor denouncing what he termed "shirkers", was LibDem leader Nick Clegg.

Caroline Lucas, the Green Party leader, described the Bill as a "mean and miserable piece of legislation from a mean and miserable government".

Around one million Scots will be affected by the changes along with nine million people across the rest of the UK.

An impact assessment on the move, released by the UK Government yesterday, confirmed that lone parents would be the worst affected, and that women would be hit more than men. The document also suggested the UK Government hopes employers will step in to make up the difference on maternity pay.

The changes will apply to a wide range of benefits and tax credits and working and non-working households will be hit.

Meanwhile, Mr Duncan Smith has suggested that other benefits could be in line for cutting. He had said pensioners could not be expected to adapt to change as easily as working age people.

But he suggested that future generations could be expected to save better for their old age, without the need for so-called universal benefits such as the winter fuel allowance.

Dr Ros Altmann, the director general of Saga, the older people's organisation, said: "The reason we have these benefits is to supplement our incredibly low basic state pension and so any move to take money away is equivalent to cutting the state pension.

"Iain Duncan Smith is right to say that pensioners need more warning of changes that impact their finances, as they are often living on fixed or dwindling incomes and, once they have retired, they cannot make up their income losses.

"Any changes also need careful planning to make sure we are encouraging people to save for their retirement. Taxing these pensioner benefits would raise extra revenue and be fairer, or changing the age of entitlement, or increasing the state pension to include the payments rather than paying as separate sums, but just sweeping them away from the majority of pensioners would leave many at risk."

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