LONDON (AFP) - British finance minister George Osborne unveiled fresh austerity measures on Wednesday to slash debt, evoking the plight of crisis-hit Greece in the first purely Conservative budget for almost two decades.

Chancellor of the Exchequer Osborne drastically cut welfare spending to honour campaign promises after his Conservative party - headed by Prime Minister David Cameron - unexpectedly won an outright majority in a May 7 general election.

Osborne said welfare spending would be slashed by £12 billion (S$24 billion) by the end of the current parliament in five years' time.

At the same time, the government will introduce a "national living wage" that could reach £9 an hour by 2020 that will be for workers only aged 25 and over.

That compares with the current national minimum wage of £6.50 an hour for those aged 21 and over, which will continue to exist alongside the living wage.

"This is a Conservative budget that can only be delivered because the British people trusts us to finish the job," said Osborne, who has a free hand with the public finances after a tense five-year coalition with the centrist Liberal Democrats.

But he cautioned: "The greatest mistake this country could make is to think all our problems are solved."

"You only have to look at the crisis in Greece to realise if a country is not in control of the borrowing, the borrowing takes control of the country," Osborne told lawmakers in his post-election budget statement to parliament.

Harriet Harman, interim leader of the opposition Labour party, slammed Osborne's budget for "making people worse off" by also axing grants for the poorest university students and capping family benefits.

However, the chancellor insisted the budget would transport Britain "from a low wage, high tax, high welfare economy, to the higher wage, lower tax, lower welfare country we intend to create".

SAVINGS SPREAD WIDE

Osborne declared the government would save £37 billion in further fiscal consolidation over the next five years.

"Today, I set out how we will find just under half of that - £17 billion," he told lawmakers.

"We found savings of £12 billion from welfare and £5 billion from tackling tax evasion, avoidance, planning and imbalances in the tax system.

"The other half will largely come from government departments through savings and cuts."

The public deficit is to be cut at the same pace as in the previous 2010-2015 parliament.

The public purse is expected to shift to a surplus by 2019/2020, which is a year later than predicted at the time of the last budget given in March.

"Without sound public finances there is no economic certainty for working people," Osborne said.

There was mixed news on the chancellor's latest forecasts for economic growth.

Gross domestic product is set to grow by 2.4 per cent this year, down from a prior estimate of 2.5 per cent, after a stronger-than-expected 3 per cent expansion in 2014.

Borrowing was revised down to £69.5 billion in the current financial year.

Osborne also confirmed there would be no change to income tax thresholds or value added taxation (VAT) for at least five years.

WELFARE PAYMENTS TARGETED

The government will cap annual welfare payments at £23,000 per household in London, against the current level of £26,000.

The amount will be set at £20,000 outside the capital.

Corporation tax, levied on business profits, will be reduced from 20 per cent to 19 per cent in 2017 and 18 per cent by 2020.

Osborne added that he will abolish the permanent non-domicile tax status to raise about £1.5 billion over the next five years.

With effect from April 2017, anyone resident in Britain for more than 15 of the last 20 years will now pay full tax on their income.

The loophole currently allows people who are "non-domiciled" in Britain because they have their permanent home elsewhere to pay tax only on income brought into Britain, and not on earnings and capital gains made outside the country.

The centre-right Tories swept into power on the back of promises to stick to the austerity plan that they implemented with the Liberal Democrats during the last coalition government.