British finance minister George Osborne said on Monday that the government will slash the welfare bill by £10 billion as it seeks to tame a massive deficit.
Chancellor of the Exchequer Osborne told his Conservative party that the world's seventh largest economy was "healing" but that Britain needed to stick to the course of tough austerity measures.
He indicated that young unemployed people were likely to see reduced housing benefit and that there could be a limit to the number of children covered by benefits for jobless people.
Osborne also ruled out a so-called "mansion tax" on big houses, a move that is likely to anger the Liberal Democrats, the junior partners in the coalition government who favour squeezing the rich.
"The great bulk of savings must come from cutting government spending, not raising taxes," Osborne said to applause from delegates at the party conference in the central English city of Birmingham.
"We have to find greater savings in the welfare bill, £10 billion ($16.1 billion, 12.4 billion euros) of welfare savings by the first full year of the next parliament" in 2016/17, he said.
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, which came to power in 2010.
Osborne's announcement will please his centre-right party but risks cementing a reputation that the left-leaning Independent newspaper summed up in its headline: "Welcome to the Nasty Party conference."
Angry protests erupted in late 2010 in Britain over plans to raise university tuition fees, cut benefits and slash costs in the public sector.
The chancellor however defended the coalition's record in a combative speech, saying its austerity measures had inspired other governments as they battle big deficits.
"We took the risk few political parties anywhere in the world are prepared to take before an election," he said.
"The economy is healing. That healing is taking longer than we hoped, because the damage was greater than we feared. But let the message from this conference be clear: we will finish the job we have started," he said.
Osborne said it was unfair that those on benefits should earn more than those who have jobs.
"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.
"How can we justify giving flats to young people who have never worked, when working people twice their age are still living with their parents because they can't afford their first home?"
The Liberal Democrats are opposed to further welfare cuts unless new wealth taxes are also introduced but Osborne rejected their proposals for a tax on high-value homes.
"It's not a Mansion Tax, it's a Homes Tax and this party of home ownership will have no truck with it," he said.
The coalition promised to cut Britain's record deficit when it was elected in May 2010 but it has struggled with a double-dip recession.
A mixture of economic worries and a series of government failures dubbed the "Omnishambles" by political commentators in Britain has seen the Conservatives' poll ratings plummet.
A YouGov poll in the Sunday Times put the Conservatives on 31 percent, the Labour opposition on 45 percent, with the Liberal Democrats on eight percent and other parties on 15 percent combined.