Britain faces major welfare shake-up as sharp cuts loom

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Britain faces its biggest welfare shake-up for decades as part of a huge cuts package, finance minister George Osborne said Monday, while promising better times "over the horizon".

Osborne spoke two weeks before the coalition government's comprehensive spending review on October 20, which is set to outline cuts of around 25 percent in most spending departments in a bid to slash a record deficit.

But alongside the cuts, there will be a "radically new welfare state" including for the first time a limit on how much benefits a family can claim, Osborne told the Conservative party's annual conference.

"No more open-ended chequebook," he said. "No family should get more from living on benefits than the average family gets from going out to work."

He said the Conservative-Liberal Democrat government was working on "the biggest reform of the welfare system" since the 1940s, when Britain's modern welfare state was created.

Welfare currently constitutes around a third of all government spending, Osborne added.

He tried to sweeten the pill by saying that, while times were tough, Britons should pull together because it was their innate sense of hard work and "aspiration" which would see the country right.

"Over the horizon is a Britain that pays its way in the world," Osborne, the Chancellor of the Exchequer, said. "There may be moments when we can't see it, when it seems out of reach. But it is always there, calling us to our task."

The Conservatives say that, under the current benefits system, some families can earn more by staying at home and claiming benefits than by going out to work, and they want to change this situation.

The announcement of a wider welfare shake-up came after Osborne announced earlier that Britain would drop the principle of child benefits for all families, which dates back to 1946.

This is necessary to tackle the deficit bequeathed to the coalition government by the previous Labour government under former prime minister Gordon Brown, he said.

Child benefit is a tax-free payment which is paid by the state to all families with children under 16.

It currently stands at 20.30 pounds (23.40 euros, 32.00 dollars) a week for the eldest child and 13.40 a week for each subsequent child.

Osborne is withdrawing the benefit from families where either parent earns around or above 44,000 pounds.

The proceeds will be used to pay for a new universal credit which is set to replace other welfare payments in the coming decade.

The finance minister warned that Britain had "no divine right to be one of the richest countries in the world" in the face of rising economic powers in Asia.

"As economic power is shifting to the east, there is nothing automatic about our prosperity," he said.

But to tackle this, he pledged to focus on promoting growth in the economy by prioritising investment in infrastructure such as transport schemes and communications networks.

© 2010 AFP

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