CHANCELLOR George Osborne has unveiled a cap on welfare spending and tougher conditions for benefits claimants as he put both issues centre stage at the next election.

In a direct challenge to Labour, the Chancellor denounced the Opposition in his annual spending review as the "welfare party" and demanded to know whether it would reverse his plans if elected.

Among Mr Osborne's reforms is a new seven-day wait for the unemployed before they can claim out-of-work benefits.

Parents will also be forced to start preparing to return to work when their children reach the age of three.

And immigrants who refuse to learn English will see their benefits stopped.

Mr Osborne borrowed the centrepiece of the reforms, an overall cap on tax credits, housing, disability and pensioner benefits, from Labour. He praised the idea as a "limit on the nation's credit card".

However, he made clear that, unlike under Labour's plans, pensions would be excluded.

The Tories have warned their inclusion would lead either to a cut in the state pension or further rises in the pension age, neither of which would be palatable to many voters.

The Conservatives believe the public is dissatisfied with Labour's stance on welfare and sees the party as on the side of malingerers who are a drain on the state.

In recent weeks, Labour has attempted to enhance its economic credibility with a pledge to exert an "iron discipline" on spending and end a "something for nothing" culture.

But the Tories pounced on an admission last weekend by Labour's Shadow Chancellor Ed Balls that if he was in power he would borrow more to boost large-scale building projects.

The welfare changes are designed to save £350 million. Unlike much of the spending review, which will apply from 2015/16, the reforms will be phased in from next April.

Announcing the new weeklong wait for benefits, the Chancellor said the first few days of unemployment "should be spent looking for work, not looking to sign on".

Mr Osborne also said it was right to expect immigrants to learn English. "This is a reasonable requirement in this country. It will help people find work," he said.

"But if you're not prepared to learn English, your benefits will be cut."

Labour last night questioned whether the weeklong wait for the unemployed would prove a boon for controversial payday lenders.

One charity warned the changes were not be a "work first" policy but a "foodbanks first" policy.

Alison Garnham, chief executive of Child Poverty Action Group, said: "The decision to delay eligibility for Jobseeker's Allowance to seven days is a 'foodbanks first' policy that will hurt families stuck in the low pay – no pay cycle, moving in and out of insecure, low-paid jobs, and will lengthen foodbank queues.

"There should be no doubt this will leave more families and children cold and hungry and push more families towards doorstep lenders and foodbanks."

Disability campaigners called for benefits for disabled people to be excluded from the cap.

Richard Kramer, deputy chief executive at deafblind charity Sense, warned the limit "risks unfairly penalising disabled people".

And he warned their inclusion could undermine the Coalition's own aims.

"The Government must realise these benefits often play a vital role in helping disabled people to support themselves in seeking and staying in work," he said.

Shelter chief executive Campbell Robb warned the cap should not lead to further cuts to housing benefit. Such a move "would be a disaster for families already battling to stay in their homes", he said.

"Housing benefit is a safety net that helps people who lose their jobs or suddenly become ill to stay in their home until they can get back on their feet. When so many families are seeing their hours cut back and are struggling to pay their rent, it's the very last thing we can afford to undermine."

l Mr Osborne pledged an "absolute clear commitment" to bring forward tax breaks for married couples but did not say when yesterday, after calls for a clear timetable from Tory MPs.