The chief secretary to the Treasury has defended the government's real-terms cut in benefits during a general debate in the Commons on the economy.
Danny Alexander told MPs that the £200bn welfare system could not be immune from spending cuts to tackle the deficit.
He insisted the 1% cap was more generous than other "punitive" suggestions put forward.
In his Autumn Statement Chancellor George Osborne announced a fresh squeeze on benefits to reduce the welfare bill by £3.7bn in 2015-16.
Labour has said it will vote against the plans.
Rachel Reeves, Mr Alexander's opposition counterpart, said the government's economic strategy had failed, with lagging growth in the UK economy.
Ms Reeves claimed the UK was 158th out of 184 countries, according to figures on growth by the International Monetary Fund between 2010 and 2012.
"It's a relegation battle, behind Togo and Namibia, behind Albania and Macedonia, but no need to worry, we are apparently hot on the heels of Mali, Samoa and Fiji.
"We are the worst performing G7 country apart from Italy. In the global race Britain is well and truly in a slow lane with this chancellor at the helm," she said.
Ms Reeves did welcome the government's decision to abolish the 3p increase in fuel duty planned for January, however, as well as the scrapping of regional pay plans and cuts in pensions tax relief for the rich.
But she said "smoke and mirrors" would not hide the "lack of a real and purposeful growth strategy".
There were three Labour maiden speeches during the debate, from Croydon North MP Steve Reed; Sarah Champion, the representative for Rotherham; and Middlesbrough MP Andy McDonald.