British First Secretary of State William Hague (L) with Finance Minister George Osbornev.
British finance minister George Osborne said on Monday that there would be no increases in state benefits for the working-age population for two years to save £3.0 billion (3.8 billion euros, $4.9 billion) as part of a squeeze on welfare spending.
As he announced the policy at his Conservative Party's annual conference, the last before the May general election, Osborne said it was "not fair" that benefits have been rising more than earnings.
"Working age benefits will have to be frozen for two years. This is the choice that Britain needs to take to protect our economic stability and to secure a better future," he told party delegates in England's second city, Birmingham.
Disability and pension benefits are excluded from the change.
The government has also said it plans to reduce the maximum level of benefits a household can claim to £23,000 a year from £26,000 in order to fund youth training schemes.
It would also prevent most unemployed 18 to 21-year-olds from claiming housing benefit.
"It is not acceptable for young people under the age of 21 to go straight from school on to benefits and into a home paid for through housing benefit," Conservative Prime Minister David Cameron said on Sunday.
Osborne on Monday also announced plans to cut a pension inheritance tax in a move expected to benefit the families of hundreds of thousands of people to the tune of a total of £150 million a year.