Labour MPs have withdrawn their demands that the cabinet restores the spending power of middle-income families next year.
It emerged in this week’s budget that all but the very poorest households will have less to spend in 2008.
However, the cabinet has agreed to make textbooks for all secondary school pupils free from next year, another request from Labour and the other two coalition parties (Christian Democrats and ChristenUnie). Cuts in child benefit will also not go ahead.
Ministers also agreed to spend more on combating childhood poverty and to set aside more cash for the fishing sector.
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