Work and Pensions Secretary Iain Duncan Smith has robustly defended plans to place a 1% cap on annual rises in working-age benefits from April 2013, and urged MPs to back the changes.
He told the Commons the proposals - opposed by Labour - were crucial to cutting the deficit and getting the overall welfare bill "down and in kilter".
But the shadow work and pensions secretary, Liam Byrne, claimed it was a "strivers tax" that would "hit working families" hardest, and said Labour would vote against the plans.
The heated exchanges came during second reading of the Welfare Benefits Up-rating Bill on 8 January 2013.
Making the case for the change Mr Duncan-Smith insisted the benefits cap was a matter of "fairness".
He said it was not right for working households to see their incomes rise by less than welfare claimants, pointing out 70% of households would not be affected by the bill.
Labour wanted to "trap more and more people" on benefits, he claimed, and accused Labour of trying to "buy votes" by strategically planning extra benefits handouts ahead of general elections.
The work and pensions secretary criticised Labour for opposing "every one" of the government's plans to cut the welfare bill, and said the party was "in denial" about the "mess" it left the economy in.
But Mr Byrne said the government should raise more from the richest in Britain's society, repeating calls for a bankers' bonus tax to create more jobs.
He said the chancellor had "battered the life out of" the economic recovery with "failed" economic policies, criticising the decision to cut top rate of tax to 45p.
"It's not Britain's millionaires who are picking up the tab, it is Britain's working families.
"This bill is a strivers' tax, pure and simple."
Liberal Democrat deputy leader Simon Hughes said he believed the coalition had "got the balance right" to get the economy out of the "mess" left by Labour.
However, his Lib Dem colleague, St Ives MP Andrew George, suggested the benefits up-rating should be linked to rises in earnings.
Later on in the debate, MPs voted by a 56-majority to give the bill its second reading. A Labour amendment to block the bill was rejected by 328 to 262 - a government majority of 66.