George Osborne
UK chancellor George Osborne will deliver his Budget to MPs on 8 JulyGetty

Chancellor George Osborne is going ahead with his plan to cut £12bn (€16.8bn, $18.6bn) in welfare spending as part of his strategy to balance the budget as promised in the election manifesto of the Conservative Party.

In an interview with the BBC, Osborne said he had identified how the government will make the welfare cuts.

"We have found that £12bn of savings in welfare that we said we'd be able to find in the election," he said.

"We've got to have a welfare system that is fair to those who need it, but also fair to those who pay for it."

The Chancellor is expected to announce a reduction in the benefit cap and removal of subsidies for social housing, when he presents the budget on 8 July, according to the BBC.

He is also expected to announce that the BBC will have to meet the £650m cost of TV licences for over-75s.

"The BBC is also a publicly funded institution and so it does need to make savings and contribute to what we need to do as a country to get our house in order. So we are in discussion with the BBC," he said.

Eliminating deficit

The welfare cuts would prevent even deeper cuts to public services and fulfil the government's aim of eliminating the deficit and running a surplus, according to Osborne.

As per his plan, the benefit cap per household per year will be cut to £23,000 in London and £20,000 outside of London. The move is likely to affect 89,000 households and save £1.67bn over the next five years, according to Treasury sources.

In addition, local authority and housing association tenants in England who earn more than £30,000, or £40,000 in London, will have to pay up to the market rent as per planned changes in housing subsidies.

The changes could affect 340,000 households and generate up to $250m per year by 2018-19 to the treasury.

In order to balance his budget, Osborne says he needs to cut the annual welfare bill by £12bn, reduce departmental spending by £13bn, and raise an extra £5bn by clamping down on tax evasion.

"On the deficit we need, of course, sensible savings but I want to see proper welfare reforms, proper public services that aren't self-defeating, that aren't going to cost much more for the country in the long term," Shadow chancellor Chris Leslie said, commenting on the plans.