British finance minister George Osborne said on Monday the government would cut the welfare bill by STG10 billion ($A15.99 billion) over the next year as it seeks to tame a massive deficit.
Chancellor of the Exchequer Osborne told his centre-right Conservative party's annual conference that it was unfair that people in work should earn less than those without jobs.
He also ruled out a so-called "mansion tax" on big houses, a move favoured by the Liberal Democrats, the junior partners in the coalition government, though he insisted the wealthy would continue to bear the greatest burden.
"The great bulk of savings must come from cutting government spending, not raising taxes," Osborne told delegates in the central English city of Birmingham.
"We have to find greater savings in the welfare bill, STG10 billion of welfare savings by the first full year of the next parliament."
Osborne indicated that young unemployed people were likely to see reduced housing benefit, while there would be other cuts across the board in Britain's welfare system.
"How can we justify that people in work have to weigh up the costs of having another child when those out of work don't?" Osborne added.
The reductions are in addition to the 18 billion in welfare cuts that are already planned by 2015 by Conservative Prime Minister David Cameron's coalition.
The Liberal Democrats are opposed to further welfare cuts unless new wealth taxes are also introduced.
The coalition promised to cut Britain's record deficit when it was elected in 2010 but it has struggled with a double-dip recession in the world's seventh largest economy.