Summer budget 2015: Osborne cuts £9bn from welfare in 'budget for working people'

Chancellor George Osborne's "budget for working people", the first from a fully Conservative government in 18 years, will cut £9bn ($13.8bn) from welfare spending by 2019-2020.

The means of making these savings include cutting housing benefit for most people aged under 21 – telling them to "learn or earn" – and announcing that universal credit will only support the first two children.

The Conservative election manifesto had promised to spread £12bn in welfare cuts over three instead of two years, but the £9bn savings proposal was still met with gasps from the house and Labour MPs saying, "you should be ashamed".

Benefits cap

Osborne said that when his government introduced a benefits cap of £26,000, Labour opposed it, but it "encouraged tens of thousands of people to find work".

He announced that the benefits cap to be reduced to £23,000 in London, and to £20,000 elsewhere. Osborne said this will save more than £1.5bn.

He also announced that healthy social housing tenants will pay market rents.

Child tax credits

If people want to have extended families from now on they will have to pay for that. After April 2017, people who have an additional child will not get extra help, and people who make a new claim will only get money for two children.

There will be exceptions for multiple births. There will be similar changes in housing benefits, said Osborne.

Learn or earn

The chancellor added that the welfare system should support the elderly, the vulnerable and the disabled, adding that disability benefits will not be taxed or means-tested.

He said: "Those who can work will be expected to look for work. It is not acceptable in a country moving towards full employment that people should leave school and go on benefits."

People aged 18-21 will have an obligation to "earn or learn", said the chancellor.

He said there will be no automatic entitlement to housing benefit for those aged 18 to 21. But there will be exceptions for the vulnerable.

Osborne said for future claimants, the ESA rate for people in the work-related activity group (WRAG) will be the same as Jobseekers' Allowance.

The £9bn savings will also come from working-age benefits being for four years, although statutory benefits like maternity pay will be excluded from this.

Osborne also said rents in social housing will be reduced by 1% a year over next four years.

He added the income threshold for tax credits will be reduced from £6,420 to £3,850, so that tax credits will be focused on the very poorest.

Osborne said the budget would take Britain "from a low-wage, high-tax, high-welfare economy, to the higher wage, lower tax, lower welfare country we intend to create".

The measures will all be included in a welfare reform bill being published on 9 July.

Harriet Harman responding to the announcements, saying if the chancellor breaks his promise to slow down the rate at which he cuts benefits, Labour will oppose him all the way.

Housing charity Shelter described the move to stop 18-21 year olds claiming housing benefit as "shameful, unjustified and cruel".