All cuts to the welfare budget will be "fair", Treasury Chief Secretary Danny Alexander has said amid Labour claims the Government planned a "vicious" attack on the poorest.
Mr Alexander defended plans to find "significant savings" from benefits after a leaked letter revealed proposals to slash at least £2.5 billion from sickness payments.
Mr Osborne put that figure on reductions in Employment and Support Allowance payments in a letter sent in June to Work and Pensions Secretary Iain Duncan Smith, the Observer reported.
The pair are locked in some of the hardest negotiations over exactly where the Treasury axe should fall, as Mr Osborne finalises his spending review - to be unveiled on October 20.
The former party leader is seeking up front investment for reforms aimed at making everyone better off in work than on benefits - which he says will save money in the longer term.
And Mr Duncan Smith's camp strongly insisted last night that he would not allow any cuts which affected anyone "too poorly to work".
Mr Alexander would not be drawn on the letter - but said things had "moved on" since it was written before June's emergency budget.
"I am not going to comment on a leaked letter but what I will say is that with welfare spending making up nearly £200 billion, of course it is something we have to look at in the context of the spending review," he told Sky News' Sunday Live programme.
"Yes of course we are looking for significant savings in the welfare system. Savings that are fair; savings that encourage people to get out to work."
He went on: "Things have moved on since June in the sense that Iain Duncan Smith has published an excellent consultation paper looking at much wider and more radical reform."
All cuts to the welfare budget will be "fair", Treasury Chief Secretary Danny Alexander has said amid Labour claims the Government planned a "vicious" attack on the poorest.
Mr Alexander defended plans to find "significant savings" from benefits after a leaked letter revealed proposals to slash at least £2.5 billion from sickness payments.
Mr Osborne put that figure on reductions in Employment and Support Allowance payments in a letter sent in June to Work and Pensions Secretary Iain Duncan Smith, the Observer reported.
The pair are locked in some of the hardest negotiations over exactly where the Treasury axe should fall, as Mr Osborne finalises his spending review - to be unveiled on October 20.
The former party leader is seeking up front investment for reforms aimed at making everyone better off in work than on benefits - which he says will save money in the longer term.
And Mr Duncan Smith's camp strongly insisted last night that he would not allow any cuts which affected anyone "too poorly to work".
Mr Alexander would not be drawn on the letter - but said things had "moved on" since it was written before June's emergency budget.
"I am not going to comment on a leaked letter but what I will say is that with welfare spending making up nearly £200 billion, of course it is something we have to look at in the context of the spending review," he told Sky News' Sunday Live programme.
"Yes of course we are looking for significant savings in the welfare system. Savings that are fair; savings that encourage people to get out to work."
He went on: "Things have moved on since June in the sense that Iain Duncan Smith has published an excellent consultation paper looking at much wider and more radical reform."