By Guy Faulconbridge and Andrew Osborn
MANCHESTER, England (Reuters) - British finance minister George Osborne will propose tougher new welfare rules and a reduction in taxes on Monday in a bid to win over voters grappling with declining spending power ahead of the 2015 election, while promising to sustain an economic recovery.
Speaking to Conservative Party activists at the penultimate conference before the election, Osborne will argue that though Britain's $2.5 trillion economy is recovering and he is optimistic about the global economy there can be no complacency.
"We can make the recovery a lasting one. But it won't happen by itself - many risks remain. We have to deal with our debts and see our plan through. If the recovery is sustained then families will start to feel better off."
Osborne's pitch is designed to counter the opposition Labour Party's charge that Prime Minister David Cameron has presided over a cost of living crisis, and is designed to appeal to working Britons who, according to polls, feel the country's annual 200 billion pound ($320.7 billion) welfare system is too generous.
He will say he wants to end what he will call "a something for nothing" culture by obliging Britain's 200,000 long-term unemployed to undertake certain activities or face losing a portion of their welfare handout.
The move, unveiled along with the slogan "For Hardworking People,' is likely to resurrect a long-running political row that critics say engenders divisive politics.
Casting the Conservatives as the party of lower taxes, cheaper mortgages and economic prudence, Osborne, who has staked his reputation on reducing the largest peacetime budget deficit left by the 1997-2010 Labour governments, will warn that higher living standards will not be instantly improved.
"Family finances will not be transformed overnight," Osborne will say according to remarks released by his office ahead of time. "What I offer is an economic plan for hardworking people. That will create jobs. Keep mortgage rates low. Let people keep more of their income tax-free."
While a recent poll shows Ed Miliband's Labour Party leads the Conservatives by 11 percentage points overall, voters still consider Cameron the politician they trust with Britain's economy, the world's sixth largest.
The gamble Cameron and Osborne are making is that the recovery combined with a plan to guarantee the mortgages of homebuyers and potential tax cuts could hand them victory in the election in May 2015.
TO BUY, TO WORK
Osborne, who will cast Labour as the party of profligacy, will force some 200,000 long-term unemployed people to do community service or search for a job daily if they want to receive state-funded unemployment benefits from April.
"For the first time, all long term unemployed people who are capable of work will be required to do something in return for their benefits to help them find work," Osborne will say.
The 'Help to Work' program will cost 300 million pounds and be financed by savings to be announced later in the year.
By tinkering with a welfare system that swallows over a third of his budget, Osborne hopes to win over working voters who polls show support changes to welfare.
Labour says the Conservative-led coalition government has failed millions of ordinary families who are poorer now in real terms than at the 2010 election, while some investors have cautioned that Cameron risks inflating a property bubble with his mortgage guarantee plans.
Adam Challis, head of residential research at Jones Lang LaSalle, said that Help to Buy was a powerful tonic that should be used with caution.
(Editing by Paul Simao)