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The welfare freeze would include Jobseeker's Allowance, Income Support, Child Tax Credit and Working Tax Credit, Child Benefit and Employment Support Allowance, paid to those judged capable of work.
Each year the UK gives over £6billion to Israel and a similar amount in arms. This is more than the combined amount of aid given to any other country.
Asked about Osborne's comments, she said: "George is a very good friend of the Israeli government and therefore he, more than anybody else, should have been saying quite frankly to the Israeli government that what you are doing is not in your interest.
This is probably the biggest single act of self-harm that the Israeli government has done over the last few years. What he should have been saying to the Israeli government is that it is unnecessary for you to kill innocent civilians, to displace a quarter of the Gazan population, for you to flatten schools, hospitals and power supplies and water supplies to achieve your end.
Had George done that, I agree with him that it would not have been necessary for me to resign."
Labour said Mr Osborne was standing up "for the very wealthiest few".