George Osborne to make £10bn welfare cuts

Among those likely to lose out from the proposed welfare cuts are under-25s, who look set to be stripped of the right to housing benefit in a move which could save the Treasury up to £1.8 billion.

The benefit reductions come on top of £18 billion cuts in welfare already under way.

But Osborne (right) will say in his keynote address to the Conservative conference in Birmingham that, while the wealthy should contribute the most to the cost of reducing the state deficit, it is not possible to balance the books "on the wallets of the rich" alone.

He will say a further £16 billion of savings must be found in 2015/16 alone to meet his target of balancing the nation's books within five years, and he will make clear that sums of this magnitude cannot be found simply by increasing taxes on the rich.

Osborne is expected to admit the job of repairing the British economy following the financial crash is "taking longer than we hoped, because the damage was greater than we feared".

But he will add: "The economy is healing... Let the message from this conference be clear: we will finish the job we have started."

Welfare cuts

In a joint article in the Daily Mail today, Osborne and Work and Pensions Secretary Iain Duncan Smith gave their backing to a proposal floated by Prime Minister David Cameron earlier this year to withdraw most of the housing benefits – worth an average £90 a week – currently paid to 380,000 under-25s.

Cameron said people should be living with their parents if they cannot fund a home of their own.

Duncan Smith is thought to have resisted the proposals – first floated in Osborne's March Budget – to slice £10 billion from the welfare budget by 2016/17 in order to protect spending in other Whitehall departments.

He is understood to have argued that Cameron should reverse a pre-election pledge to protect universal benefits for older people, such as free bus passes and winter fuel payments, by removing them from wealthy pensioners.

But he and the Chancellor said they had reached agreement that the savings can be found without touching the universal benefits for pensioners.

Deputy Prime Minister Nick Clegg told his party's conference last month that he would not allow "wild suggestions" of a £10 billion cut in welfare.

Meanwhile Chief Secretary to the Treasury Danny Alexander told delegates: "We simply will not allow the books to be balanced in a way that hits the poorest hardest."