Benefits

Who's on the side of the strivers? Is it George Osborne, who's cutting benefits in real terms for the next three years, which he defends as 'being fair to the person who leaves home every morning to go out to work and sees their neighbour still asleep, living a life on benefits'? Or is it Ed Balls, who's opposing the move as Osborne 'making striving working families pay the price for his economic failure'? Both men are convinced that their stance will help win the votes of low- and middle-income workers. At least one of them is wrong. Isabel has explained the sources of Labour's confidence. One is a YouGov poll released on Sunday, showing 42 per cent of 'C2DEs' (working class and lower) think benefits should rise at least in line with inflation.

Liam Byrne is a modernising, Blairite Labour MP, and in case you were in any doubt about that, he conducts his interview with Coffee House sitting next to a framed photograph of him with Tony Blair. The party's Shadow Work and Pensions Secretary is well known for his modernising zeal, which has sometimes led him onto a collision course with his party grassroots and other MPs on the left. This week, though, he's on a collision course with the Conservatives, who hope they've managed to corner Labour into admitting it hasn't quite modernised its welfare policy enough to win voters back. The Welfare Uprating Bill, launched in last week's Autumn Statement, will see benefits rise by 1 per cent, rather than in line with inflation.

Ed Miliband is ready to wage war with David Cameron and George Osborne over the Welfare Uprating Bill, which will see benefits rise by 1 per cent a year, rather than in line with inflation. The Labour leader has been talking tough in the papers this morning, with a piece in the Sunday Mirror in which he says: 'We should be tough on the minority who can work and try to avoid responsibility. But there comes a moment when a government is exposed for who they are. That happened to David Cameron and George Osborne this week. 'They showed they are not fit to govern because they played political games with people's livelihoods. They said they were cutting benefits for the next three years and the mood music was that it was a way to punish the 'shirkers and scroungers'.

Welfare will be one of the key battlegrounds at the next general election, and George Osborne's Welfare Uprating Bill will certainly be one way the Conservative party can prod Labour on what is a hugely awkward policy issue for the party. It accelerates the internal debate about how Labour can appeal to the electorate on the issue of welfare while staying true to its own core beliefs, and, Tory strategists hope, will cause some ructions. While the party appeared united in Manchester at its autumn conference in September, it faces hard times ahead as it tries to answer some of the big questions about what a Labour welfare state would look like.

If you're the tax personality of the year, as David Gauke is, the pressure's on when you give an interview to be as lively as possible. Gauke's interview with the House magazine today doesn't disappoint, with the Exchequer Secretary accusing those who oppose the child benefit cuts of 'fiscal nimbyism'. He says: 'I think there’s a lot of people who are in favour of reducing the deficit but then when it’s something that affects them there can be a degree of fiscal nimbyism. The reality is that every section of society is having to make a contribution. 'We can’t pretend that there can be sections of society which we can completely protect from deficit reduction.

Interesting comments from Ruth Davidson, the chairthing of the Scottish Conservative Party, about her fellow countrymen. Only twelve per cent of Scots, she says, contribute more to the exchequer than they take out in the form of benefits. “The rest lie around on filthy sofas in subsidised homes, watching daytime television while farting, mainlining heroin and stuffing their sad grey faces with pies full of regurgitated sheep gizzards and Windolene.” Actually, I paraphrase a bit there. She didn’t say all that stuff. She just said almost nine out of ten Scots take more in benefits than they generate in wealth. This is, she says, shocking, and the Scots have too great a sense of entitlement.

Nick Clegg's attack on universal benefits such as the winter fuel payment and free bus passes this afternoon was a nice little morsel of red meat to his party, as he said it would be 'difficult to explain' a failure to reform these payments when other benefits are being slashed. He told the World at One: 'My own view is for the future that it would be very difficult to explain - and it would be quite interesting if you could ask the Labour party for this, because they appear to be saying that at a time when people's housing benefit is being cut, we should protect Alan Sugar's free bus pass.' But I've just had a chat with Lord Oakeshott, who is impatient that the Lib Dems should be looking at this sort of thing while they are in government rather than discussing their next manifesto.

There are more rumblings this morning on the shape of the next comprehensive spending review, this time at grassroots level within the Liberal Democrats. The Times reports threats from former Lib Dem MP Evan Harris that any attempt to sign up to a traditional spending review will trigger an emergency motion at the party's autumn conference. The leadership is already well aware of this issue: I blogged last week that a senior party figure had told me that the £10 billion of welfare cuts that George Osborne has predicted are necessary over the next spending review period are 'just not going to happen'. Clegg and co know that the Lib Dem grassroots will not weather another round of welfare cuts when they already feel their MPs have had to bend over backwards for the first set.

One popular prediction swirling around Westminster this morning is that part of the Government's response to the GDP disaster will be to cut more money from the welfare budget. After all, George Osborne told MPs in his Budget statement that there would need to be a further package of £10 billion cuts in welfare spending over the period of the next spending review, and the IMF has made similar noises, too. But I understand that this is not going to happen because the Liberal Democrats will not let it go through. Sources are emphatic that those at the top - Nick Clegg, Danny Alexander et al - have blocked the £10 billion of cuts for this parliament. 'It's just not going to happen,' says one senior party figure.

David Cameron and Nick Clegg's railways announcement wasn't the only attempt today by the coalition to bounce back from the strife of the past few weeks. Iain Duncan Smith also chose to point to another area where the Government is delivering on voters' demands: welfare. In an op-ed in the Daily Mail, the Work and Pensions Secretary said the £26,000 benefit cap for workless families, which is one of the government's most popular policies, is already effecting the behavioural change ministers hoped it would, with a third of claimants saying they are going to look for a job in order to avoid the cap, which comes into effect in 2013.

How significant was this Budget? On an economic level, not very. There's no discernible impact on growth: all of the main forecasts have more or less stayed the same since the Autumn Statement. Borrowing is the tiniest bit lower, mainly thanks to a £23 billion accountancy trick with Royal Mail pensions. And even many of the policies announced today will barely rouse the Exchequer's attention. That cut in the top rate of income tax to 45p? It will mean only £100 million a year less in direct revenues. That stamp duty increase for properties worth over £2 million? It will net only £300 million a year. The overall effect is a fiscally neutral document, as expected. The fuss-to-impact ratio for Budget 2012 is pretty high.