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UK's Osborne pledges to freeze working age welfare benefits for two years

British finance minister George Osborne said on Monday he would freeze working age benefits for two years if his ruling Conservative party was re-elected in May, saying such action was necessary to protect the country's economic security.

"Working age benefits in Britain will have to be frozen for two years. This is the choice Britain needs to take to protect our economic stability," Osborne told his party's annual conference.

Osborne said the freeze would exclude disability and pensioner benefits.

"The fairest way to reduce welfare bills is to make sure that benefits are not rising faster than the wages of the taxpayers who are paying for them."

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The Conservatives, who have ruled in coalition with the more left-wing Liberal Democrats since 2010, are rated by voters much more highly than the opposition Labour party on the economy. But they lag narrowly behind Labour in opinion polls less than eight months before the election.

Osborne has focused on bringing down Britain's massive budget deficit since he took over the finance ministry in 2010. But with the public accounts still deep in the red, he has little room to offer major tax cuts ahead of the election.

Last week, Labour promised to levy new taxes on homes worth more than 2 million pounds ($3.3 million) and on tobacco firms in order to pump cash into healthcare if it wins the election.

Britain's economy has staged a much stronger-than-expected recovery since mid-2013 and Osborne, in his speech on Monday, will seek to remind voters that keeping the economy growing will be vital to create jobs, build more houses, fund healthcare and raise living standards.

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Osborne has long sought to remind voters that Labour was in power during the 2007-08 financial crisis that plunged Britain into its deepest post-war recession.

Osborne says the increasingly left-wing ideas of Labour leader Ed Miliband threaten the push to eliminate the budget deficit before the end of the decade.

"The idea that you can raise living standards, or fund the brilliant NHS (National Health Service) we want, or provide for our national security without a plan to fix the economy is nonsense," Osborne said.

Last week, Miliband gave a conference speech in which he forgot to mention the budget deficit. Labour's would-be finance minister Ed Balls has said the party will tackle the deficit with a plan that is less aggressive than Osborne's.

Chancellor of the Exchequer George Osborne addresses the Conservative party conference in Birmingham, England.
Matt Cardy | Getty Images
Chancellor of the Exchequer George Osborne addresses the Conservative party conference in Birmingham, England.

Labour dismissed Osborne's planned speech as failing to tackle the issues they say matter to ordinary Britons.

"George Osborne claims he has fixed the economy, but he's only fixed it for a privileged few at the top," said Chris Leslie, Labour's finance spokesman.

Tax abolished

Osborne's pledge to scrap the tax on pension savings has echoes of how, when in opposition in 2007, he promised to cut inheritance tax. That popular move was widely credited with dissuading the Labour prime minister at the time, Gordon Brown, from calling a snap election he had looked likely to win.

Osborne turned his attention to elderly voters again earlier this year, scrapping a requirement that most pensioners buy annuities on retirement and allowing them to spend their pension savings as they wanted.

The Conservative Party saw a small boost in opinion polls after those reforms were announced.

That shake-up hit shares in firms such as Legal & General, Aviva and Standard Life which sell annuities, and experts predicted the latest tax measure could also affect demand for such products.

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