A future Conservative Government will set an “ambition” of closing the North-South economic divide, Chancellor George Osborne has revealed.
But speaking at the Tory conference in Birmingham, Mr Osborne dramatically announced a two-year freeze on working-age benefits - effectively cutting benefits for millions of people, once inflation is taken into account.
The freeze will save the Treasury £3bn, he said.
Mr Osborne insisted the way to reduce poverty was not to give people benefits but to get them into work and cut their taxes.
The Chancellor highlighted plans to invest billions of pounds in transport infrastructure in the North to create a “Northern Powerhouse” equal to London.
He insisted the Government’s “long term economic plan” was working, and boasted of “business growth faster in the north than anywhere else”,
But he admitted too much wealth was still concentrated in London.
Mr Osborne said: “The answer is not to pull down and hold back our greatest global asset - that would be crazy.
“The answer is to build up the rest of our country. To create a Northern Powerhouse of the cities across the Pennines.”
Mr Osborne repeated his call for the North to embrace directly-elected mayors, saying: “Successful businesses. Modern high speed transport. Big science investments.
“Top universities, and the strong leadership that comes with powerful elected mayors.
“Those are the ingredients of a Northern Powerhouse.
“That is how we deliver prosperity and security for families across the nation.”
And he added: “Let us choose today to make reducing the gap between north and south, London and the rest, one of the central ambitions of the next Conservative Government.”
Mr Osborne said his planned benefit freeze was part of a an attempt to eliminate the budget deficit - which will mean £25bn of permanent public expenditure savings.
He said: “Working age benefits in Britain will have to be frozen for two years. This is the choice Britain needs to take to protect our economic stability and to secure a better future.”
Labour accused the Government of cutting the incomes of “striving families”.
However, Labour Shadow Treasury spokesman Chris Leslie criticised freezes to tax credits, which are included in Mr Osborne’s plans and are claimed by people on low pay,
He accused the Chancellor of “cutting tax credits which make work pay for millions of striving families”.
Mr Leslie said: “While working people have seen their wages fall by £1,600 a year since 2010, the Tories have once again shown they are the party of a privileged few at the top.
“Labour will balance the books as soon as possible in the next Parliament. We will reverse the Tory tax cut for millionaires, stop paying the winter fuel allowance to the richest 5% of pensioners and cap child benefit rises at 1% for two years.”
And Chi Onwurah, Labour MP for Newcastle Central, said: “When George Osborne says the economy is fixed and the sun is shining, many in the North East won’t know whether to laugh or cry.
“He has cut taxes for millionaires while leaving ordinary working people in the North East worse off by £1,800-a-year.
“He says - again – that he will rebalance the economy to the North, he doesn’t even know where it is.”