Osborne: we’ve found £12bn of welfare cuts

Mr Osborne said the benefits cap will shrink from £26,000 to £23,000 a year in London and will be lower outside the capital.

He hinted that tax credits for people on low incomes will also be cut in the first budget of the new Conservative government.

Speaking on BBC1’s The Andrew Marr Show, the chancellor said: “We have found that £12bn of savings in welfare that we said we’d be able to find.

“We’ve got to have a welfare system that is fair to those who need it, but also fair to those who pay for it.

“It is not fair that people out of work can earn more than people in work so we are going to cut the benefit cap, as we said in our manifesto, to £23,000 in London – it will be lower in the rest of the country.”

On tax credits for low earners, he said: “It has become a very, very expensive system. When it was introduced, we were told by Gordon Brown it was going to cost a couple of billion pounds.

“It now costs £30 billion. That is a huge sum of money. That’s three times the Home Office budget, so we have to make savings.”

Before the election, the Conservatives said they wanted to balance the current budget deficit by 2017/18, by cutting £12bn from the welfare bill, making £13bn of departmental spending cuts and raising an extra £5bn through a tax evasion and avoidance crackdown.

Labour’s treasury spokesman Chris Leslie said: “We need, of course, sensible savings but I want to see proper welfare reforms, proper public services that
aren’t self-defeating, that aren’t going to cost much more for the country in the long term.”

Mr Osborne also said people in higher incomes in council housing would have to start paying more, and he warned the BBC that it will have to make a “contribution” to paying down the deficit.

The chancellor did not comment directly on reports that he is planning to make the corporation pay the £650m cost of for free TV licences for the over-75s.