George Osborne to cap welfare payments

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Speaking to the Conservative conference in Birmingham, George Osborne did not put a figure on the new welfare cap, but said that - with the exception of the disabled - no family will receive more in benefits than the average family receives from going out to work.

Speaking to the Conservative conference in Birmingham, Mr Osborne did not put a figure on the new welfare cap, but said that - with the exception of the disabled - no family will receive more in benefits than the average family receives from going out to work.

The announcement came as Mr Osborne also announced that he will withdraw child benefit from families where one parent earns enough to pay higher-rate tax - currently about £44,000.

Mr Osborne said that he and Work and Pensions Secretary Iain Duncan Smith had devised the biggest reform of the welfare state since the war-time work of William Beveridge.

He said it would result in "a radical new welfare state where it always pays to work, where effort is always rewarded and where fraud can no longer hide behind complexity".

And he promised: "For the first time, we will introduce a limit on the total amount of benefit any one family can receive.

"The limit will be set according to this very simple principle: Unless they have disabilities to cope with, no family should get more from living on benefits than the average family gets from going out to work.

"No more open-ended chequebook. A maximum limit on benefits for those out of work, set at the level that the average working family earns.

"Money to families who need it - but not more money than families who go out to work.

"That is what the British people mean by fair - and we will be the first Government in history to bring it about."

The Chancellor said he wanted Britain to be a home for a "successful, competitive and stable" financial services industry.

But in a warning over bankers' bonuses he said: "I want to see genuine talent rewarded. But let me make this clear today: we will not allow money to flow unimpeded out of those banks into huge bonuses if that means money is not also flowing out in credit to the small businesses who did nothing to cause this crash and suffered most in it.

"Nor will we tolerate tax evasion. It is unacceptable at the best of times, it too is morally indefensible in times like these and this party will not stand for it."

Setting out the withdrawal of child benefit, Mr Osborne said: "We still pay over a billion pounds a year in child benefit to higher rate taxpayers.

"Believe me, I understand that most higher rate taxpayers are not the super-rich.

"But a system that taxes working people at high rates only to give it back in child benefit is very difficult to justify at a time like this.

"And it's very difficult to justify taxing people on low incomes to pay for the child benefit of those earning so much more than them.

"These days we've really got to focus the resources where they are most needed.

"We've got to be tough but fair.

"That's why we will withdraw child benefit from households with a higher rate taxpayer.

"When the debts left by Labour threaten our economy, when our welfare costs are out of control, this measure makes sense."

Mr Osborne said his plans were "tough but fair - because we are all in this together".

With the comprehensive spending review due later this month, Mr Osborne said: "I want to explain to the British people why we have to sort out the public finances, how we will do it and the prize at the end: a reinvigorated, prosperous, united Britain of which we can all be proud."

He warned that Britain did not have a "divine right" to be a major economic power and pledged to target spending at measures that support growth.

"Britain has no divine right to be one of the richest countries in the world. As economic power is shifting to the east, there is nothing automatic about our prosperity.

"If our skill base continues to decline, there will be no growth. If our infrastructure remains poor, there will be no growth.

"If we don't support our businesses, there will be no growth. If we don't improve our education, for everyone, our country will become more unequal, more unfair, less prosperous.

"So we will give priority to spending that supports growth in our economy.

"That means investment in the transport schemes, the medical research and the communications networks that deliver the greatest economic benefit.

"It means a Green Investment Bank and carbon capture and storage so we reap the financial rewards of the green energy revolution.

"It means introducing a pupil premium so that the poorest in our country have access to the kind of education currently only available to the richest.

"It means finding new sources of income to support our universities and colleges.

"We will do everything to make Britain one of the most competitive places in the world to do business."

Mr Osborne made a barbed reference to new Labour leader Ed Miliband and his brother David, contrasting their relationship to the way he was working with Business Secretary Vince Cable.

"People said we wouldn't get on, that we'd trade cruel nicknames, that we would knife each other in the back, that we'd try to end each other's careers.

"Who do they think we are? Brothers?

"Together, Vince and I have started to open Britain for business."

Mr Osborne said the decisions he was making were "a means to an end" which would lead to sustainable growth.

With the Tories portrayed as pessimists by Labour last week, Mr Osborne stuck an optimistic note, insisting that Britain could be "a beacon for liberty and justice".

He told the conference: "The hard economic choices we make are but a means to an end. And that end is prosperity for all.

"Not from the quick fix of another debt bubble or by hitching the country's entire fortunes again to the City of London.

"Not growth confined to one corner of our country or one sector of our economy. But lasting, sustainable growth that will only come from releasing the aspirations of the whole British people.

"The foundations of a strong economy don't rest alone on the decisions of chancellors or the spending programmes of government.

"They come from the most basic human instincts of all: the aspiration to have a better life, to get a better job, to give your children a better future.

"The aspiration to work the extra hour, to play a bigger part in your community, to have a bigger say in your country and its future.

"These aspirations are the most powerful forces in our nation. And I want them put to work for a better future for us all.

"We don't choose the times we live in. Not for us the easy years of plenty. Not for us the times of quiet management.

"That's not the canvas upon which my generation has been asked to paint.

"No, you don't get to choose the times in which you live, but you do get to choose how you live in them.

"Just over the horizon lies the Britain we are trying to build. Let it be a hopeful country, because we governed with imagination.

"Let it be a united country, because we governed with fairness.

"Let it be a prosperous country, because we governed with courage.

"Over the horizon is a Britain that pays its way in the world. A Britain that is a beacon for liberty and justice.

"There may be moments when we can't see it, when it seems just out of reach.

"But it is always there, calling us to our task. The task of this generation.

"The task of the British people. Together in the national interest."