Iain Duncan Smith and David Cameron
Iain Duncan Smith and David Cameron plan to cut £12bn from Britain's welfare bill by 2017/18Getty

David Cameron faces tough questions about how his government will slash the UK's welfare bill by £12bn ($18.3bn) after Number 10 denied it was planning to cut child benefit.

The statement came after reports claimed Iain Duncan Smith, the work and pensions secretary, had "ordered" civil servants to consider capping the payment to up to three children per family.

However a Downing Street spokesman told the press lobby that the government have ruled out such a move for the whole five years that the Conservatives are in power.

The promise, which means families will still be entitled to at least £13.70 a week, raises questions about where the Conservatives will make cuts to drastically reduce the welfare bill by 2017/18.

Some cost reductions, including reducing the benefit cap from £26,000 to £23,000 to save £100m, have already been announced.

However, £10.5bn of potential cuts to the welfare budget are yet to be made public, according to the Institute for Fiscal Studies (IFS). The independent think tank warned that the cuts will involve "difficult decisions".

"In many ways it provides an illustrative case study of the issues that governments always face when looking for ways to reduce spending in this area," an IFS report concluded.

"Saving money while only affecting better-off claimants will tend to weaken work incentives.

"Saving money while protecting or strengthening work incentives tends to mean hitting some of the poorest in society and hence increasing poverty. We should soon find out the balance that the new government chooses to strike."

Labour seized on the original report and called on Chancellor George Osborne and Cameron to "come clean" over welfare cut plans.

"For months Tory ministers have refused to rule out cutting child benefit and tax credits to fill the £12bn black hole in the welfare budget," said Rachel Reeves, the shadow work and pensions secretary.

"And today we've learnt that Duncan Smith has ordered civil servants to draw up plans to cut child benefit, which would mean millions of working families losing out.

"Cameron and Osborne must come clean with the public about their plans to cut child benefit and child tax credits."