By Peter Griffiths

LONDON (Reuters) - Britain's opposition Labour Party sent a message to skeptical voters on Thursday that it can be trusted to run the economy and balance the books, promising to focus on tight spending and a cap on the welfare budget if it wins the next election.

In a speech designed to restore Labour's economic credibility and counter Conservative taunts that it is the "Welfare Party", leader Ed Miliband set out plans for stricter controls on the vast benefits bill.

While polls give Labour a 10-point lead over the Conservatives, they also show that voters see Prime Minister David Cameron as a safer pair of hands with an economy still recovering from the financial crisis.

"If we are going to turn our economy round...and build a stronger country we will have to be laser-focused on how we spend every single pound," Miliband said in a speech in Newham, east London, one of the capital's poorest districts.

Three days earlier, Miliband's finance spokesman Ed Balls said in a speech at Thomson Reuters that he would have "iron discipline" on spending.

With an election less than two years away, the speeches appear to be part of a co-ordinated attempt to restore Labour's reputation for sound economic management after years of Conservative attacks on its record of borrowing and spending.

Labour's image was badly damaged by the 2008 crisis when a credit crunch forced the government to rescue several banks and the economy entered a prolonged downturn. Labour was also criticized for allowing Britain's budget deficit to peak at just over 11 percent of gross domestic product.

'EMPTY RHETORIC'

The Conservatives, accused by Labour of choking growth with its austerity policies, said Miliband's plan would not cut costs and would lead to more borrowing and higher interest rates.

"This is just the same old Labour: empty rhetoric smattered with more spending, more borrowing and more debt," Conservative Chairman Grant Shapps said.

The future of a welfare system that accounts for more than a third of state spending is among the most contentious issues facing party leaders before the election.

They are under pressure to reduce the deficit and to counter a perception that "benefit cheats" abuse the system at the expense of taxpayers.

However, Cameron, often portrayed as a wealthy and uncaring member of an out-of-touch elite, is wary of being seen to penalize society's most vulnerable. Miliband, meanwhile, must be careful not to damage a safety net that was largely created by his party at the end of World War Two.

Acknowledging that confidence in the system had been shaken, Miliband said Labour would impose a three-year cap on structural welfare spending, such as housing and disability payments. He did not give a figure for the cap.

Labour would cut the bill for housing benefits by giving local officials the power to negotiate with landlords, he added.

Miliband also promised to reduce welfare spending by tackling underlying problems, such as unemployment, low pay and the high housing costs.

(Editing by Angus MacSwan)