UK's Osborne to slash welfare but quiet on growth BIRMINGHAM, England (Reuters) - Britain's Conservatives would slash government spending on welfare by 10 billion pounds ($16 billion) a year if re-elected, finance minister George Osborne said on Monday, though he offered few ideas on how to bring the economy out of recession. The 2015 election is likely to be decided on the health of the economy, the pace of deficit reduction and the areas of spending and taxation on which each party would focus to balance stretched public finances. The Conservatives, who had bet that growth would reduce the deficit and help them win the next election, are struggling with a recession and a series of blunders which have put them about 10 points behind the opposition Labour Party in opinion polls. Chancellor of the Exchequer (finance minister) Osborne and Prime Minister David Cameron are trying to use their party's annual conference in Birmingham to project an image of economic prudence and have promised more spending cuts across the board. "We will have to find greater savings in the welfare bill," he said. But his plans may cause tension with the government's Liberal Democrat junior coalition partners. Osborne dismissed their calls for a "mansion tax" on expensive homes or a further tax on the wealthy. "This party of home ownership will have no truck with it," he told the conference. The great bulk of savings must come from cutting government spending - not increasing taxes. The Lib Dem business secretary, Vince Cable, said: "As far as we're concerned we haven't had a formal negotiation about this. Clearly, if they are reluctant to move on things we consider fair taxation, it's going to be difficult for us to move on things that matter for them. Cable, on a visit to Nigeria, said the issue would be "a dividing line we will be perfectly happy to campaign on in the next general election." Osborne, a close Cameron ally who was booed by crowds at a Paralympics medal ceremony last month, said Western democracies would lose ground relative to wealthy emerging economies unless they reformed welfare, education and tax. In the 35-minute speech, Osborne said the Conservatives must appeal to those who aspired to improve their situation, adding it was a delusion to believe public finances could be put back on track by raiding the "wallets of the rich." Britain's welfare budget is estimated at 207 billion pounds ($335.2 billion) in 2012/13 - almost a third of total spending. But many Conservative lawmakers are worried that Osborne cannot revive growth. In one of the biggest set-piece speeches of the political calendar, the 41-year-old offered few new ideas on how to nurture Britain's stagnating economy back to health. Osborne's March budget forecast he would have to cut borrowing by 49 billion pounds in the two years following the 2015 election, after weak growth put paid to his plan to eliminate the record deficit before the election. Osborne has staked his reputation on preserving Britain's AAA sovereign credit rating. A 375 billion pound central bank-funded bond-buying drive has reduced the cost of government borrowing to record lows. But the underlying budget deficit has risen by a fifth so far this year compared to the same period last year and public sector debt rose to more than 1 trillion pounds at the end of August - 66 per cent of gross domestic product. Investors say Osborne, who announces revised economic and borrowing forecasts on December 5, will be forced to either cut spending more deeply or extend austerity well after the next election to honor his pledge to tame the deficit. He also said shale gas could get generous tax breaks. The Lib Dems' Cable said Osborne's plans were "an entirely hypothetical discussion" about a budget that would ultimately be the responsibility of whoever won the next election. "I've made it very clear we're not making commitments on spending levels into the next parliament," he said. $1 = 0.6176 British pounds Additional reporting by Tim Cocks in Lagos; Editing by Mark Heinrich, Giles Elgood, Paul Taylor and Kevin Liffey