David Cameron: £12bn welfare cuts to end tax credit 'merry-go-round'

David Cameron has indicated he will end a welfare "merry-go-round" of tax credits through £12bn of planned budget cuts.

The prime minister criticised the current welfare system saying low earners were being taxed and then paid back in benefits. Attacking the legacy of previous governments, Cameron said tax credit provision had been built upon the "pieces of failure that had gone before".

The comments followed confirmation from Chancellor George Osborne and Work and Pensions Secretary Iain Duncan Smith that £12bn a year in benefit will be cut from the July budget.

"We need to move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society," Cameron said to an audience in Cheshire, addressing the subject of welfare reform.

"There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the government and then the government giving them that money back, and more, in welfare," he said.

"Again, it's dealing with the symptoms of the problem, topping up low pay rather than extending the drivers of opportunity, helping to create well paid jobs in the first place."

The prime minister said he would take on vested interests to boost social mobility and economic opportunity.

In a letter published in the Sunday Times on 21 June, Osborne and Duncan Smith said they would be pushing on with the welfare cuts.

Changes include a new benefits cap to be introduced as part of Westminster's plans for "reforming the damaging culture of welfare dependency" to "bring the bloated benefits bill under control".

Osborne and Duncan Smith wrote: "We will set out in detail all the steps we will take to bring about savings totalling £12bn a year in next month's budget and at the spending review in the autumn."