George Osborne and Ed Balls exchange blame for economy 'mess'
George Osborne denies working poor hit hardest by Autumn Statement
(about 2 hours later)
George Osborne has said he will not listen to "the man responsible" for the UK's economic problems, after Ed Balls said coalition policy was "failing".
Chancellor George Osborne has denied his Autumn Statement will hit the working poor harder than the rich.
The chancellor, who played down a risk to the UK's AAA credit rating, is on a media tour after his Autumn Statement.
Mr Osborne insists a benefit squeeze is fair on people who go out to work and pay tax.
He rejected criticism from the shadow chancellor, saying Mr Balls, with Gordon Brown, had created the "mess".
But Labour says the majority of people affected by the move, announced in Wednesday's statement, are in work.
But Mr Balls said policy was hitting working families and it was time to change the UK's economic course.
All working age benefits, including tax credits and child benefit, will go up by 1% a year, less than the rate of inflation, for the next three years.
Britain was facing a "tough economic situation... but it could be much worse," Chancellor George Osborne told BBC Breakfast.
In his statement, Mr Osborne confirmed it would take longer to clear the country's debts than he previously thought - and this means the spending cuts will go on for longer than planned.
He said he had "taken action in a very difficult situation", on areas such as pensions, benefits, and businesses.
Pensioners have been protected with pensions going up by 2.5%.
Labour says a working family with children on £20,000 a year would lose £279 a year from April.
But the chancellor said a further squeeze on the welfare budget was needed to help pay off the deficit - but he said other moves, such as a £1bn raid on the pension pots of the wealthy, meant the "richest 20% have paid most".
But the Treasury dismissed the claims such families would be worse off as a result of changes to tax and benefits announced in the Autumn Statement.
He said measures such as raising the level at which people start paying income tax and scrapping a planned 3p rise rise in fuel duty would also help the low paid and proved "we're all in this together".
On Wednesday the Fitch agency said the UK's AAA credit rating was under threat after the chancellor said the coalition would miss its debt reduction target.
He sought to justify the squeeze on benefit payments by suggesting working people would support it.
A cut to the credit rating would mean that the country is perceived as more risky to lend to, thereby raising the cost of borrowing from international investors.
"I think people getting ready to go out to work, they are frustrated that they pay their taxes, that they work long hours and a lot of that money, frankly too much of that money, goes into a welfare system that supports out-of-worklessness," Mr Osborne told BBC News.
Asked about that move on BBC Breakfast, Mr Osborne said: "It wouldn't be a good thing but the credit rating is one of a number of ways in which people look at countries."
But Shadow Chancellor Ed Balls said the majority of people affected by the move were not unemployed - and a working family with children on £20,000 a year would lose £279 a year from April.
In his Autumn Statement Mr Osborne announced a fresh squeeze on benefits, as he admitted the UK economy was performing less well than expected.
"He (Mr Osborne) somehow wants to attack people he thinks are workshy and feckless but if you look at the facts 60% of the people who are affected by that 1% freeze are in work".
Most working age benefits, such as Jobseekers Allowance and Child Benefit, will go up by 1%, less than the rate of inflation, for the next three years.
He said a below-inflation 1% increase in maternity pay and an upcoming cut in the top rate of income tax made a mockery of Mr Osborne's claim to be cutting fairly, saying: "Where's the fairness in that?".
A bill limiting benefit increases is expected to be introduced in the Commons this month, ministers have said.
Labour has not yet said whether it will vote against the government, but Mr Balls is pointing out that many of those in receipt of benefits are not unemployed, but are in low-paid work, and that statutory maternity pay will also be limited to a 1% increase.
While austerity measures will be extended to 2018, Mr Osborne also announced more money for roads and schools and axed a planned 3p fuel duty rise.
He said "turning back now would be a disaster" for the UK. But Labour said his credibility was "in tatters".
Shadow chancellor Ed Balls accused Mr Osborne of breaking his own rules, on which his credibility depended.
"After two and a half years we can see, and people can feel in the country, the true scale of this government's economic failure," Mr Balls told MPs,
He said the average family with children on £20,000 a year would be "worse off" - even with the personal allowance changes.
Mr Balls claimed Mr Osborne's plan to raise £1bn from pension tax relief on the well-off raised less than £1.6bn given away in Mr Osborne's first Budget on the same reliefs.
But the chancellor said the measure proved "we are all in it together".
Mr Osborne had said debt would start falling as a proportion of GDP by 2015/16 - the year of the next general election.
But he has been forced to delay that target by a year because of the worse than expected state of the economy, which is now expected to shrink this year by 0.1%.
UKIP's Godfrey Bloom was critical of measures announced in the Autumn Statement, saying the country was "going to be stuck in a permanent recession until the chancellor cuts spending".
"He hasn't cut public spending at all. In fact, it's either flat-lining or slightly moving up. He's borrowing a further hundred billion pounds a year. Every pound that he spends, 18 pence goes to service the debt. So until he makes some very serious attempts to cut public spending we're going to be locked in this recession for some time".
The Office for Budgetary Responsibility says the UK has a "better than 50% chance of eliminating the structural current deficit in five years time", said the chancellor - meaning his other key objective has been pushed back by a year to 2017/18.
Do you expect your family to be affected by the changes to tax and benefits? Please send us your questions for the BBC's financial journalist, Paul Lewis, who will be on the BBC News Channel today.
Do you expect your family to be affected by the changes to tax and benefits? Please send us your questions for the BBC's financial journalist, Paul Lewis, who will be on the BBC News Channel today.
