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Osborne: 'Raise The Ambition Of The Nation'

George Osborne has said Britain can no longer afford to be a country where £100bn is spent on paying benefits for those of working age.

Announcing a two-year freeze on benefits for those who could be working, Mr Osborne said: "Families out of work should not get more than the average family in work."

He said that benefits had risen more than earnings "since Labour's Great Recession" and more had to be done to drive down welfare costs, which accounted for a third of all Government spending.

Mr Osborne added the move would save the country £3bn and hinted there would be a further £9bn of welfare cuts to be announced in the run up to the General Election.

The Chancellor insisted the Tories' "long-term economic plan is working" as he attempted to outline a choice for voters between the Conservative's "economic competence" and a Labour that would return to country to the downturn of recent years.

He stressed the Government had reduced the deficit by nearly half since coming to power and joked it was so important to Ed Miliband that he left it out of his conference speech in Manchester last week entirely.

He said: "Ed Miliband made a pitch for office that was so forgettable he forgot it himself.

"In all seriousness, forgetting to talk about the deficit is not just some hapless mistake of an accident-prone politician, it is completely and totally a disqualification for the high office he seeks."

The Chancellor also challenged Labour's claims to being the only party of the NHS saying "the real party of the NHS is in this hall today" adding Mr Miliband's party would "ruin" the health service because it could not exist without a healthy economy.

Sky's Political Editor Faisal Islam said the Chancellor was "trying to basically signal one single message which is about security, securing the recovery. 'We know we have not done everything but stick with us and we will show you this promised land in the future'".

Mr Osborne's other key announcement was scrapping the so-called "death tax" on pension pots with immediate effect. It will mean those who have saved into their pensions will no longer pay the 55% tax if they wish to pass the money to their families.

The Chancellor's speech was largely seen as an attempt to seize back ground made by UKIP and to steady the ship after two Conservative defections and the resignation of the Minister for Civil Society over a sex pictures scandal at the weekend.

The "death tax" cut will cost the Treasury an estimated £150m - the equivalent of just a 0.03p cut in income tax - but it will appeal to older voters who are more likely to be swayed by Nigel Farage's party.

However, it has emerged Mr Osborne had been the one to increase the tax from 35% to 55% and had already suggested it in the Autumn Statement.