UK will reduce welfare costs by next election, Healey says

LONDON, Oct 29 (Reuters) - British finance minister John Healey said the government would lower its spending on welfare benefits by the time of the next election as he sought to address one of the big public spending challenges that remain after his first budget announcement.

Asked by the BBC in an interview broadcast on Thursday whether welfare spending would be cut before the next election, Healey said: "There will be a reduction in the benefits bill. We'll do that in a Labour way."

Healey announced his first major set of tax and spending plans on Wednesday which offered some short-term support for households hit by the surge in energy prices and raised taxes on banks, savers and landlords to help pay for it.

But the budget did not address some long-term issues facing the public finances, including the growing bill for welfare spending on pensioners and working-age people in poor health, which is set to cost more than 11% of the country's economic output this year.

Healey said Britain had to prevent the spending from getting ever bigger and he focused on the problem of unemployment among young people.

"I feel a moral duty to deal with these youngsters that ... have been written off by previous governments," he told the BBC.

A government review into young people who are not in employment, education or vocational training is due to be published next month and another review into the disability benefits system is being finalised.

(Writing by William Schomberg; editing by David Milliken)