He said the proposed cap of £26,000 was “a good place to start”.

The Bill has contributed significantly to recent opinion poll surges putting Prime Minister David Cameron ahead of Labour leader Ed Miliband, even though the claimed £270-£300 million savings are dwarfed by the overall £198 billion social welfare budget.

The Welfare Bill suffered its fifth ­rejection in the Lords earlier this week

but coalition ministers, who believe they have backed a winning, popular policy could not contain their delight as they pledged to press ahead with it in the House of Commons.

The Lords were out of touch with ­public opinion, the Government insisted, as it revelled in the contortions of the Labour Party which found itself opposing a bill it said it supports. The Labour front bench was even reported to have held a special midweek briefing by party pollsters as to the popularity of the policy among certain sections of voters.

The Government lost by 257 votes to 232 Labour peers, who reversed their official party stance, and joined the ­bishops and Lib Dems led by their former leader Paddy Ashdown in backing the amendment to exempt child benefit from the £26,000 cap.

Lord Ashdown asked how could it be right for a household with joint earnings of £80,000 to get child benefit but not a family with income of less than a third of that.

The Department of Work and Pensions insisted that excluding child benefit would mean an effective benefits cap of closer to £50,000.

Mr Duncan Smith’s shadow, Liam Byrne, defended the party’s stance after a proposed Labour amendment asking for safeguards to protect those at risk of homelessness was rejected a s a “wrecking” amendment.

He said it was justified because the bill was so badly devised it risked imposing the costs of ensuing homelessness on councils and council taxpayers.

The DWP says 67,000 families will lose money, as opposed to the 50,000 previously estimated but will not ay how many are expected to be plunged into poverty. Mr Duncan Smith says that, on the contrary, they will be encouraged not into poverty but into work.

His stance was supported this week by the Archbishop of Canterbury Rowan Williams and his predecessor George Carey, both of whom criticised their colleagues in the Lords.

Twelve out of 15 of the hardest-hit constituencies with the highest claimant count are Labour-held – the other three are Sinn Fein, DUP and SDLP. All 15 with the lowest claimant counts are Conservative and Liberal Democrat, including the Prime Minister’s own constituency of Witney, and some actually report unemployment is dropping, particularly among the long-term unemployed.

Four of the worst jobless blackspots are in Birmingham – in seats held by Shabana Mahmood, Liam Byrne (the Shadow Work and Pensions Secretary), Jack Dromey and Roger Godsiff.

Mahmood’s seat – Birmingham Ladywood – is the highest in the United Kingdom for people claiming the Jobseeker’s Allowance with more than 9,000 people claiming JSA, including 2,370 claiming for more than a year. This is up almost by 1,000 since a year ago – with a 310 increase in long-term claims. More than one in five people in her constituency are claiming JSA. Liam Byrne’s seat – Birmingham Hodge Hill – is the second highest with 7,234 claiming JSA, 1,750 for more than a year. This is a rise of 723 and 250 in a year.

Other Labour seats with high claimant rates include two in Liverpool – held by Louise Ellman and Steve Rotherham – Middlesbrough, held by Stuart Bell, and Nottingham North held by Graham Allen.

The two seats with the lowest claimant count are West Aberdeenshire and Kincardine and Gordon – both held by Liberal Democrats. West Aberdeenshire, held by Robert Smith, has 511 people claiming JSA – one in 100 people in his constituency – down by 20 from a year ago. Gordon, held by Malcolm Bruce, has 630 claiming JSA – down 52 in a year.

Among the Tories, John Redwood’s Wokingham constituency is also one of the lowest – the number claiming JSA has fallen from 953 to 936 with 15 fewer claiming for more than a year. A detailed analysis shows an increase in claims from people aged under 24 being more than offset by a fall in claims from older people, including the over 50s.

His remarks – in the context of the downbeat forecast for the global economy – echoed an earlier, prescient, warning from IMF chief executive Christine Lagarde last autumn and foreshadowed the worse than expected economic figures for the United Kingdom.

The IMF, in its downward revision of UK and global growth forecasts, advised that those countries not cut off from the markets by unaffordable borrowing costs must avoid further discretionary austerity.

“Decreasing debt is a marathon, not a sprint. Going too fast will kill growth”, said Mr Blanchard less than 24 hours before it was revealed British growth shrank even more than had been expected at the end of last year and the country is at risk of re-entering recession.

One of Chancellor George Osborne’s stoutest defenders, advertising entrepreneur Sir Martin Sorrell, speaking as the World Economic Forum kicked of in Davos, Switzerland, expressed confidence that a so-called “double-dip” recession could be avoided – but only if the Government starts to promote a credible growth strategy.

Public spending cuts, while necessary, are not, by themselves enough, he said. People have to have some cause to look ­upward and believe there is a pay-off for the pain, he said.

Prime Minister David Cameron – more than 18 months into government – sought to explain Britain’s most recent ­economic contraction as a result of both the debt overhang from the last Labour Government and the eurozone crisis.

Labour leader Ed Miliband, in his weekly exchange with Mr Cameron, while missing an opportunity to cite Mr ­Blanchard’s advice – that if growth is ­dismal a government can go about its ­discretionary budgetary cuts more slowly – used the opportunity to deride Mr Cameron’s insistence that overall the UK economy had actually grown in 2011, albeit very modestly.

Not only had growth contracted and unemployment risen, but the very deficit his austerity plan was designed to eliminate would instead increase by £158 billion by the end of the current parliament, he said.

Shadow Chancellor Ed Balls, who said Britain’s stagnant economy had gone into reverse, called for an immediate cut in VAT, National Insurance for small firms, and a repeat of the tax on bankers’ bonuses in the forthcoming Budget.

Members of the Yorkshire and ­Humberside region of Unison voted to withhold regional party funding following the announcement by Labour leader Ed Miliband and Shadow Chancellor Ed Balls that the party would not oppose the ­coalition Government’s public sector pay freeze or pledge to reverse any of its ­spending cuts if it wins the next election.

The region covers the parliamentary seats of Mr Miliband in Doncaster North, Mr Balls in Morley and Outwood and Shadow Foreign Secretary Yvette Cooper in Normanton, Pontefract and Castleford. If ratified nationally the decision is likely to cost the regional party up to £15,000.

Other regions are considering similar action and grassroots members of the GMB and Unite – whose general secretaries have publicly condemned the sudden shift in the party’s official stance – are ­agitating for some form of protest, ­including the withdrawal of funding.

According to one witness, another member of the Shadow Cabinet, the ­environment frontbencher and MP for the Yorkshire constituency of Wakefield, Mary Creagh, was given “a hard time” over the issue at a regional Labour Party meeting.

The backlash comes amid accusations that the labour leadership has abandoned any alternative to the coalition’s cuts agenda and as the Tories show signs of extending their lead in the polls over Labour.

In an interview with The Guardian, Mr Balls said: “My starting point is, I am afraid, we are going to have to keep all these cuts.” His remark coincided with a series of ­announcements conceding policy changes and cuts ranging from defence to welfare from Shadow Cabinet ministers Liam Byrne, Jim Murphy and Stephen Twigg, dubbed by Unite general secretary Len ­McCluskey as the “horsemen of the ­austerity apocalypse”.

In a scathing response to the announcement from Mr Balls and Mr Miliband, Mr McCluskey warned that half the electorate had been disenfranchised and that the next election would be lost. Aides for both attempted to play down interpretations of a policy shift, saying that it was merely impossible to make pledges on an economic scenario that could not be predicted.

But there is intense anger at all levels in the unions over the fact there was no ­consultation before the apparent policy shift was made. This will now focus on the TUC meeting which Mr Miliband is due to address in May.

One senior trade union figure summed up the mood as “fucking awful – it’s really serious. A new policy has emerged and ­nobody knows where it came from or who made it.

“The unions and Labour are supposed to be allies, but they’ve kicked union ­members in the head. Why would you pay money to them for that?

In a speech broadcast live from Damascus University, he warned of a “foreign conspiracy” to destabilise his country. He said: “Regional and international parties who are trying to destabilise Syria can no longer falsify the facts and events. They turned to assassinations with regional and international media coverage. After all their attempts failed, the role of foreigners emerged. What is going on in Syria has been planned tens of years ago.” He added: “There can be no let-up for terrorism – it must be hit with an iron fist.”

President Assad’s claim of “foreign ­interference” is a reference to Western countries, principally the United States, and neighbouring countries, such as Turkey, whose relations with Damascus have long been mired with mistrust. Meanwhile claims of “terrorist activity” are a reference to Islamists, mainly from the Muslim Brotherhood, who organised armed ­insurgencies in the 1970s and ’80s against the secular regime and who are ­believed by Western intelligence agencies to have links with al Qaida.

In an attempt to cling on to power in the face of continuing protests, President Assad announced that a new constitution would be drawn up, with a referendum held on it this March, and elections held – possibly at the beginning of May.

The speech was his first public ­pronouncement since observers from the Arab League arrived last month to monitor the situation. The head of the mission, ­Sudanese General Mustafa Dabi, reported – to general derision in Western capitals – seeing “nothing frightening” in the ­flashpoint city of Homs.

President Assad’s government received a symbolic boost from its historic ally Russia last weekend when a Russian naval task force, led by the Admiral Kuznetsov aircraft carrier, docked at the port of Tartus, where Moscow maintains a naval base. The Syrian defence minister, visiting the flotilla, praised the historic relations between Damascus and Moscow

Many Madridlenos are not impressed and most posters are amended by ­comments from travellers who have their own views about the meaning of the words “more” and “less”.

But the grafiteros of Madrid are unlikely to bother the new Prime Minister Mariano Rajoy of the right-wing Popular Party.

His election with a huge majority – the largest in the modern history of democratic Spain – completes a clean sweep for the PP which also controls most of the powerful regional administrations, including Madrid.

The PP priority is to bring the budget deficit – which currently stands at around 8 per cent of gross domestic product – under control. The mix of spending cuts and tax rises are in roughly equal proportion and the government hopes to reduce the fiscal gap by some 20 billion euros this year.

The across-the-board cuts are deep and painful – only the state pension remains ­intact. Tax rises announced so far are ­surprisingly progressive and the prime minister is insisting that the better off pay their share. The marginal rate for the wealthiest has risen from 45 per cent to 54 per cent in some regions.

George Osborne – and all those ­arguing in favour of abandoning Britain’s 50 per cent top rate – should take note.

Protests at the cuts are muted for several reasons. First, progressive tax rises on income and property convey a sense of “we are all in it together” far beyond David Cameron’s vacuous phrase.

Second, the socialist party, the PSOE, is disorientated after its worst defeat in modern times and has embarked on a ­leadership struggle which will consume time and energy for the months ahead.

In any event, it was the PSOE which began the current austerity drive which, as Labour knows, makes opposition tricky.

But perhaps the most important factor is a national mood that seems determined to show that Spain will not follow Greece close to the edge of the precipice of default.

So, for the moment at least, Spaniards are generally taking their large dose of fiscal medicine with apparent calm. Or sangfroid, as the Germans say in concert with the French these days.

The highly reputable “bankers’ bible” the Financial Times kicked off the year with a major series to that effect – although within its pages there appears to be pragmatic scepticism as to just what Prime Minister David Cameron or even Opposition leader Ed Miliband can actually do to stop so-called “crony capitalism”.

At the end of this month, the elites of the financial world will meet for their ­annual jamboree at the World Economic Forum in the rarefied atmosphere of Davos, within days many EU heads of­ government and finance ministers will make their way from it to the latest emergency summit to tackle the eurozone crisis.

So endemic has the crisis of confidence become – or modish, depending on your perspective – that those who would hold our economic fate in their hands at Davos have even put the scourge of rising ­inequality on the agenda for discussion.

Perhaps, more tellingly, the discussion will be about the potential threats posed by a perceived growing backlash against such inequality – either as a result of the Arab Spring or the Occupy movement – and how to respond.

A major pre-conference report published this week, to form the key-note discussions at the event, warns that, among 50 listed threats to financial stability, the gap between the haves and have-nots and the debt burdens faced by many developed economies most threaten to undermine the perceived gains of globalisation in recent decades.

At both ends of society – rising youth unemployment at one and the inability to pay retired workers’ pensions at the other, set against soaraway rising wealth of the few at the top of society – are sowing the “seeds of dystopia”, according to the report drawing on opinions from 469 experts and industry leaders.

“For the first time in generations, many people no longer believe that their children will grow up to enjoy a higher standard of living than theirs. This new malaise is particularly acute in the industrialised countries that historically have been a source of great confidence and bold ideas,” says the WEF Global Risks Report:?Sowing the Seeds of Dystopia.

As individuals are being driven to assume the costs and risks of their own healthcare and retirements earlier hopes that globalisation would mean higher living standards for all are being met by the reality that ever growing numbers of ordinary working people are fearful for their futures, it warns.

In Britain, the Government is pinning its hopes on avoiding a double-dip recession with ordinarily pro-Conservative business groups seeking to instil confidence – against a backdrop of unprepossessing statistics – that a further recession this year does not have to be a foregone conclusion.

Equally, London and other EU capitals are hoping that the German economy – while falling in output compared to recent years – will be sufficient to save that all-important market the eurozone, from which German exporters benefit

Critics of Chancellor George Osborne and Prime Minister David Cameron have been quick to deride what they call this Government’s “not much bread but plenty of circuses” – the London Olympics and the royal jubilee –?policy to distract from the slower than hoped for recovery.

As the loss of pubic sector jobs is set to continue through this year in what government and Bank of England economists continue to call a “rebalancing” or “correction” of the Tony Blair and Gordon Brown years the hoped for substitution by the ­private sector has yet to happen.

Figures this month show that companies are cutting back on temporary hires for the first time since 2009 and that the private sector has been creating one job for every thirteen lost in the public sector. At least 120,000 more public sector jobs are expected to be lost this year.

The Office of Budget Responsibility, whose forecasting has often been as disappointing as that of the Bank of England, hopes that there will be cause for cautious cheer this year as last year’s ever-rising fuel and food costs, and last year’s VAT increase, fall out of the inflation statistics. It also hopes joblessness will peak at 8.7 per cent by the end of this year.

But bodies such as the Chartered Institute of Personnel Development, whose own projections dating back to the 2010 general election have been shown to be more robustly accurate than the Treasury’s, think that by next year joblessness

will edge above even the gloomiest official forecasts.

In human terms, that means 2.85 million people without work, of whom, more than a third or just over a million are ­accounted for by youth unemployment.

Ministers point to an increase in the number of jobs advertised but a prominent recruitment agency said that while it had seen a jump of eight per cent in newly posted jobs it also saw an increase in­ ­applications of 42 per cent.

To put it into context, in London – which has a healthier employment turnover than many parts of the United Kingdom which face the prospect of becoming employment black spots – there are 60 applicants for every single secretarial or customer service post that comes up.

To add insult to injury, National Audit Office figures published by The Times and endorsed by the Public Accounts Committee chair Margaret Hodge suggest that since 2009 Whitehall departments wasted £31.8 billion on items such as shelved, ­unusable IT systems, uncollected taxes and poor value for money among 700 Private Finance Initiative projects for schools, ­prisons and hospitals and which many NHS trusts say are “unaffordable”.

This figure is twice the amount ­Chancellor George Osborne is committed to cutting from public spending this year and more than a third of the cuts planned between now and 2015.

Ms Hodge and her fellow committee members have singled out many individual PFI contracts as “outrageously dreadful value for money”.

She said: “[It is] blindingly obvious that frontline services could be saved by ­tackling the waste in the system. It’s very difficult to put a figure on it but there are tens of billions of pounds of waste. This amount destroys confidence in the value of public services. If successive governments had got a better handle on getting best value, we wouldn’t have to face some of the horrendous cuts people are facing today.”

The World Economic Forum Global Risks 2012 Report: Sowing the Seeds of Distopia is available at www.reports. weforum.org/global-risks-2012 l

The Government’s cuts to back office staff are starting to bite in a number of big councils which have missed their auditing deadlines by four months or more – including, ironically, the town represented by Mr Pickles, Brentwood in Essex.

A report by the Audit Commission – itself scheduled for abolition by Mr Pickles – reveals that 12 councils have still not issued final accounts for the last ­financial year.

These include some of the biggest councils in England – such as Birmingham, Newcastle and Norwich – as well boroughs like Brentwood, Corby, Mole Valley, Huntingdonshire, Runnymede and Thurrock as well as the Broads Authority, Merseyside Integrated Transport Authority and West London Waste Authority.

Merseyside and Huntingdonshire did not have enough staff to do the audit ­properly, nor did a number of other authorities which reported up to three months late, including Wellingborough, the London borough of Brent and the Leicester, Leicestershire and Rutland ­combined fire authority.

Many authorities could not publish accounts on time because they were full of errors and mistakes, including Brentwood and Birmingham, Newcastle and Norwich.

The disclosure was balanced by three councils which published their accounts early – including Kent, the London borough of Greenwich and Oldham.

The report says: “The number of bodies where the auditor reported material misstatements requiring adjustment ­increased significantly for 2010/11.”

The Commission also condemns the lack of a proper audit at some parish councils – an area often overlooked but singled out by Mr Pickles for light touch financial checks – as part of his cost cutting exercise. The Commission points out that the nearly 9,500 parish councils spend £500 million a year between them.

Among the most disturbing findings are that 14 parish councils have failed to disclose any accounts for three years or more – even though they are levying a precept on all households in their area.

The Audit Commission said: “Local electors are entitled to see how their parish council has spent taxpayers’ money. Parish councils that fail to publish an audited annual return are not providing this most basic level of accountability.”

Parish councils in Lincolnshire, Leicestershire, Warwickshire, Suffolk, Dorset, Cumbria and Lancashire were slated. The worst was Fillingham in Lincolnshire which has produced no accounts for 10 years.

Some 133 parish councils have ­produced inaccurate accounts for the past three years – suggesting, the Commission says, ­“systemic weaknesses in their  financial management and governance arrangements”.

The British Government claims that the Scottish Parliament has no legal authority to hold a referendum of its own, and that only the Westminster Parliament has the ­constitutional power to do so.

It has offered to cede this power to ­Holyrood, subject to a set of conditions which seek to alter fundamentally the terms on which an independence referendum will be held.

Condition number one is an ultimatum to bring the date forward to within the next 18 months, that is, by the summer of 2013.

Further conditions include that the vote should be legally binding. It should be a ­single question for or against independence. Westminster has to be consulted on the wording of the question, and the actual date for the ballot. Under-18s should not be ­allowed to vote.

Ministers have said any attempt by the ruling SNP government to conduct the advisory referendum it planned to call in the autumn of 2014 could be subject to legal challenge.

On one aspect all parties, for and against independence, are agreed – that the coalition’s manoeuvres have a single objective: to secure a legally-binding “No” vote, which could bury the issue for years to come.

Any second question relating to the ­possibility of further extending Holyrood’s existing powers, often known as “devo-max”, is being specifically excluded.

The SNP has responded by angrily ­rejecting these demands and claiming that it has a clear mandate to carry out a referendum of its own in the second half of this Scottish Parliament, based on the stunning overall majority in Holyrood which it won at the May 2011 elections.

Scottish Labour leader Johann Lamont MSP has indicated that Labour would ­welcome an earlier referendum, with a single question. She evaded media questions as to whether Labour would campaign alongside the Conservatives for a No vote.

The Labour opposition at Westminster, and its Scottish partners, were apparently taken completely by surprise when the coalition launched this head-on confrontation with the SNP.

It seems there was no attempt to consult the Labour leadership in advance over this attempt to take over the referendum and effectively run it from London, on Westminster’s terms.

Both the coalition and the SNP will be undertaking consultations over their respective proposals in the coming months.

Mr Miliband’s morale is said by ­supporters to be very low after two weeks of battering criticism and sniping from Labour colleagues and adverse criticism of his “weak” leadership in the media.

A defeat for Mr Livingstone’s attempt at a third term at London’s City Hall is seen by some senior figures who are unreconciled to Mr Miliband’s defeat of his brother David as a potential catalyst for rebellion leading to some form of ultimatum or even an outright leadership challenge.

The result would be seen and portrayed as a reflection on Mr Miliband’s leadership as he struggles to make a greater impact against David Cameron and the coalition Government at a time of economic gloom and swingeing cuts.

Mr Miliband has left even some of his supporters in despair after appearing to make major concessions to the Shadow Cabinet’s right-wing over deeper spending cuts.

At a press conference where members of the media laughed openly when shadow Treasury minister Rachel Reeves referred to Mr Miliband’s “steely determination”, the Labour leader signalled that he may be prepared to go further in cutting parts of current public spending than the coalition.

He dismissed claims that he had an image problem which will hamper his chances of winning the next election but said he could not promise to reverse the coalition’s cuts.

In briefings to the media, “senior Labour sources” were quoted as saying

that the party “will have to go further than the Tories” in cutting public spending

in some areas.

In what was billed as an event to enable Mr Miliband to assert his authority over his party and the political high ground of the economy and a fairer society, he said: “Next time we come back to power it will be different. We will be handed a deficit. So we must rethink how we achieve fairness for Britain in a time when there is less money to spend.”

Since the beginning of the year, a number of senior Labour figures have spoken out on cuts and Mr Miliband’s ­leadership. Defence Secretary Jim Murphy outlined a package of cuts that would ­embrace planned coalition cuts and in some areas go further. He stuck to his own portfolio in an ­announcement that should prove relatively uncontroversial, though it only trimmed rather than scuppered the Trident programme.

Shadow Work and Pensions Secretary Liam Byrne called for a radical re-evaluation of the welfare state, saying spending was far too high and that it had lost its founding purpose.

Mr Miliband’s former advisor Maurice Glasman wrote that his leadership had “flickered rather than shone” while former Cabinet member Alan Johnson suggested the leadership would have to improve to connect with voters.