Welfare spending to be cut by £4bn, says George Osborne

The government is planning to reduce the annual welfare bill by a further £4bn, Chancellor George Osborne has told the BBC.

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Chancellor George Osborne: Welfare budget "completely out of control"

He will give details of the savings, which follow an £11bn cut made in June, in October's spending review.

The Treasury says the targets for the reductions are still being discussed.

But Mr Osborne told BBC political editor Nick Robinson that those making a "lifestyle choice to just sit on out-of-work benefits" would be affected.

He described the welfare budget as "completely out of control".

Labour said the plans would hit the poorest in society, including pensioners and disabled people, rather than the "work-shy".

The combined £4bn and £11bn cuts represent about 6% of total spending on welfare.

The BBC understands discussions are continuing in Whitehall about whether it is possible to limit pensioner benefits - such as the winter fuel allowance, bus pass and free TV licence - without breaking Prime Minister David Cameron's election promise that he would preserve them.

A special BBC News season examining the approaching cuts to public sector spending

The Conservatives have described as "lies" Labour's warnings those benefits would be scrapped.

The Treasury is currently holding meetings with individual ministers ahead of the October's spending review, likely to be the toughest in a generation.

Mr Osborne said: "There are five million people living on permanent out-of-work benefits. That is a tragedy for them and fiscally unsustainable for us as a country - we can't afford it any more.

"Of course, people who are disabled, people who are vulnerable, people who need protection will get our protection, and more.

"But people who think it's a lifestyle choice to just sit on out-of-work benefits - that lifestyle choice is going to come to an end. The money won't be there."

For Labour, shadow work and pensions secretary Yvette Cooper said: "We don't know how the cuts are going to fall. But the reality is that the £11bn of benefit cuts they've already announced are hitting the poorest, such as pensioners and the disabled, hardest - not the work-shy.

"We really need to see the detail of these £4bn of cuts, not just listen to the rhetoric."

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Yvette Cooper: "Their measures are increasing the number of people on benefits"

Most government departments have been told to prepare packages of cuts worth between 25% and 40% for the spending review, which will be outlined on 20 October.

Earlier, Deputy Prime Minister Nick Clegg said there were "difficult decisions" ahead, but the savings would begin in April 2011 and be "spread evenly" over the next four years - equivalent to an annual 6% budget reduction.

BBC-commissioned research suggests industrial areas in the North East and Midlands are least resilient to such changes.

Middlesbrough is ranked as the most vulnerable to cuts, followed by Mansfield in Nottinghamshire and Stoke-on-Trent.

The Spending Review: Politicians come face to face with the public across England to talk about the cuts. BBC One at 2235 BST on Thursday, and on local BBC radio at 0900 BST on Friday.