The prime minister and William Hague have clashed over the issue of asylum, with Tony Blair calling on the opposition leader to say he'd match government spending on the immigration service.

Hague accused Tony Blair on Wednesday of turning the UK into a "soft touch", contrasting the number of people seeking asylum in the UK to those trying to get residency in other EU countries.

In their weekly Commons exchange on Wednesday, Tony Blair accused William Hague of missing the point, saying that for the first time last year the number of asylum applications processed exceeded the number of applicants.

The two also exchanged strong words over the resignation of Peter Mandelson with the prime minister accusing Hague of failing to bring up issues such as "jobs, the economy, schools and crime" on which Labour "win and he loses".

Hague called on Blair to either withdraw his early tribute to Mandelson or reject the comments made by his official press secretary, who accused Mandelson of being "detached" in the run up to his sacking. Hague had asked Blair whether "his official spokesman had been speaking for Tony Blair when he made his extraordinary briefing".

Charles Kennedy, who on Wednesday launched a poster campaign attacking Hague's "bandwagon" politics, accused the Tory leader of delivering his "latest dose of pebble-dash populism".

Kennedy demanded to know from the prime minister why the British government would not follow the Scottish executive's example and introduce free long-term care for the elderly in England and Wales. "If it's good enough for one part of the UK, why is it not good enough for England and Wales," he demanded to know.

Blair stressed that the Scottish executive, under devolution, was "perfectly entitled" to introduce free long-term care, but added that he "better believed the money is spent in the NHS".