Osborne says he has found £12B of welfare cuts

Chancellor George Osborne on Sunday said he had found all 12 billion pounds ($19 billion) of welfare cuts he needs as part of his plan to balance the current budget by 2017/18, speaking ahead of his budget announcement on Wednesday.

The budget is Prime Minister David Cameron's Conservatives' clearest chance in almost two decades to remould Britain into a low-tax, small-state economy after an unexpectedly decisive election victory.

To meet his target, Osborne says he needs to cut the annual welfare bill by 12 billion pounds ($18.69 billion), make 13 billion pounds of departmental spending reductions, and to raise an extra 5 billion pounds by clamping down on tax evasion and avoidance.

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"We have found that 12 billion pounds of savings in welfare that we said we'd be able to find," Osborne said on BBC television, without specifying full details. "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."

Signalling possible areas for cuts, he said tax credits, used to top up earnings for the low-paid, had become a "very, very expensive system" and that housing benefits were a "major component" of government spending.

But the opposition Labour Party warned against "self-defeating" spending cuts.

Osborne: We want to lower national debt
Osborne: We want to lower national debt   

"On the deficit 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," Labour spokesman Chris Leslie told the BBC.

Economist Howard Archer at IHS Global Insight said Osborne's political incentive to deliver the cuts straight after the election was to give himself the fiscal room to cut taxes or increase spending before the next election, in 2020.

Osborne said that households outside London would be subject to a lower cap than previously thought on the total amount of benefits they can receive. The cap will be reduced to 23,000 pounds for those in London, in line with pre-election promises, but he did not set out the lower ceiling that would apply elsewhere.

He said those on high incomes in subsidised local authority housing would have to start paying closer to the market rental rates.

The Sunday Times reported that Osborne plans to launch a 650 million-pound raid on the BBC to help cover the country's benefits bill.