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20 October 2010 Last updated at 10:05 ET <!-- Adding hypertab --> <!-- end of hypertab --><!-- Embedding the video player --><!-- This is the embedded player component --> <!-- end of the embedded player component --> <!-- Player embedded -->

Chancellor George Osborne has unveiled the biggest UK spending cuts since World War II, with welfare, councils and police budgets all hit.

The pension age will rise sooner than expected, some incapacity benefits will be time limited and other money clawed back through changes to tax credits and housing benefit.

A new bank levy will also be brought in - with full details due on Thursday.

Mr Osborne said the four year cuts were guided by fairness, reform and growth.

But shadow chancellor Alan Johnson, for Labour, called the review a "reckless gamble with people's livelihoods" which risked "stifling the fragile recovery" - a message echoed by the SNP, despite better than expected cuts in Scotland.

Mr Osborne ended his Commons statement, by claiming the 19% average cuts to departmental budgets were less severe than the 25% expected - thanks to an extra �7bn in savings from the welfare budget.

He claimed this meant his savings were less than the 20% cuts Labour had planned ahead of the general election.

Outlining his Spending Review in the Commons, which includes �81bn in spending cuts over four years, he told MPs: "Today is the day when Britain steps back from the brink, when we confront the bills from a decade of debt."

He claimed the programme would restore "sanity to our public finances and stability to our economy", telling MPs: "It is a hard road, but it leads to a better future."

The government will slash the amount of money it gives to local councils by 7.1% from April, but will give local authorities more control over how council tax money is spent.

Universal benefits for pensioners will be retained as budgeted for by the previous government and the temporary increase in the cold weather payment will be made permanent.

But a planned rise in the state pension age for men and women to 66 will start in 2020, six years earlier than planned.

The main new welfare savings come from abolishing Employment and Support Allowance for some categories of claimant after one year, raising �2bn, and higher contributions to public sector pensions.

Bank levy

Mr Osborne also said axing child benefit from top rate taxpayers would raise �2.5bn - more than predicted when the policy was announced earlier this month.

Up to 500,000 public sector jobs could go by 2014-15 as a result of the cuts programme, according to the Office for Budgetary Responsibility.

Mr Osborne has not set out in detail where the jobs will go but he admitted there will be some redundancies in the public sector, which he said were unavoidable when the country had run out of money.

He has set out extensive cuts to the budgets of individual government departments including:

• Home Office - 6% cuts, with police spending down by 4% each year of the spending settlement
• Foreign Office - 24% cut through reduction in the number of Whitehall-based diplomats and back office costs
• HM Revenue and Customs - 15% through the better use of new technology and greater efficiency
• Justice - 6%, with plans for a new 1,500 place prison dropped and local courts closed

The Department for International Development's budget will rise to �11.5bn over the next four years, reaching 0.7% of national income in 2013.

The science budget will be ringfenced and the increase for the NHS over the whole spending period has been confirmed as 0.4%, or 0.1% a year.

The schools budget will rise from �35bn to �39bn and, overall, the Department for Education will be required to find resource savings of just 1% a year.

Each government department will next month publish a business plan setting out reform plans for the next four years.

The government will also deliver �6bn of Whitehall savings - double the �3bn promised earlier, said the chancellor.

The Spending Review is the culmination of months of heated negotiations with ministers over their departmental budgets and comes a day after the Ministry of Defence and the BBC learned their financial fate.

'Irresponsible gamble'

The MoD is facing cuts of 8% - less than most other departments but enough to mean 42,000 service personnel and civil servants will lose their jobs over the next five years and high-profile equipment such as Harrier jump jets, the Ark Royal aircraft carrier and Nimrod spy planes will be scrapped.

The BBC has been told it must freeze the licence fee for six years and take over the cost of the World Service, currently funded by the Foreign Office, and the Welsh language TV channel S4C. This adds up to an estimated 16% cut in the BBC's budget in real terms.

The chancellor insists tough action on spending is needed to stave off a debt crisis - and that the private sector will create new jobs to fill the void.

Labour would also have had to make major cuts if they had won the general election, but the party insists Mr Osborne's plans were too aggressive and risked tipping the country into a "double dip" recession.

During raucous Commons exchanges, Shadow chancellor Alan Johnson accused Tory backbenchers of cheering "the deepest cuts to public spending in living memory".

He claimed that for some on the government benches cuts were an "ideological objective" and "what they had come into politics for".

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20 October 2010 Last updated at 09:57 ET <!-- Adding hypertab --> <!-- end of hypertab -->

A levy on bank balance sheets will be made permanent, potentially raising billions of pounds, Chancellor George Osborne has confirmed.

The chancellor said he would introduce legislation on Thursday in order "to extract the maximum sustainable tax revenues from financial services".

He said he wanted banks to make a fair contribution.

The banking industry said the move would have an impact, particularly on overseas banks operating here.

The government expects the levy to generate around �2.5bn a year.

"We neither want to let banks off making their fair contribution, nor do we want to drive them abroad," the chancellor said.

"Many hundreds of thousands of jobs across the whole United Kingdom depend on Britain being a competitive place for financial services," he added.

The levy is not expected to affect smaller banks and building societies but the UK operations of foreign banks will have to pay the levy.

The British Bankers' Association said that banks "fully understand they have a role to play in the UK's economic recovery".

"Decisions taken today will have an effect on the whole industry and particularly on overseas banks operating in the City," it added.

"We clearly need to see the detail of today's announcements to be able to assess their impact on the UK banking sector and our attractiveness as a global financial centre."

But it added that it was pleased that the chancellor had indicated the government wanted to strike a balance between raising tax revenues and keeping the UK's financial services sector competitive.

The levy is expected to be introduced in January and differs to the previous government's tax on bank bonuses.

It will be a tax on the total size of bank balance sheets, but certain items, including retail deposits covered by insurance and bank capital will be excluded.

According to June's Budget documents, the levy will be set at 0.04% in the first year and will then rise to 0.07%.

Code of practice

The chancellor also reiterated that he wanted all of the UK's top 15 banks to sign up to a code of practice on taxation introduced by the previous government.

He said that only four banks had signed up so far and had earlier set a November deadline for the rest to comply.

The code of conduct seeks to deter banks from avoiding tax, and follows reports that many banks have used complex transactions and financial instrument to avoid tax.

The code calls on banks to ensure that their tax and the tax obligations of their customers are observed - and that they do not go out of their way to avoid tax for themselves or clients

20 October 2010 Last updated at 09:18 ET <!-- Adding hypertab --> <!-- end of hypertab -->

The state pension age will now rise to 66 by 2020 for both men and women, the Chancellor, George Osborne, has said.

The plan brings forward by six years the plan that the previous Labour government had put in place.

Mr Osborne told MPs that the increase from 65 to 66 would be phased in from 2018.

This will also accelerate the existing plan under which women's pension age would have been equalised with men at age 65, by 2020.

Mr Osborne said the new policy would eventually save the government �5bn a year by the end of the next parliament.

"Raising the state pension age is what many countries are now doing, and will by the end of the next parliament save over �5bn a year - money which will be used to provide a more generous basic state pension as we manage demographic pressures," Mr Osborne said.

In 2007, the Labour government followed the recommendations of Lord Turner's Pensions Commission.

It decided that the state pension age should rise: to 66 by 2026, to 67 by 2036 and to 68 by 2046.

During the summer, the new coalition government held a public consultation on bringing forward the first element of this plan because of the widespread evidence that people are continuing to live longer.

The government said at the time that leaving the state pension age at 65 "was not an option" and raising it would contribute to making the state pension more affordable as pensioners spent longer in retirement.

Public sector pensions

Following the recent initial recommendations of Lord Hutton's independent commission, the government will seek to raise the contributions that public servants make to their pension schemes.

Mr Osborne said that any increases should be "staggered and progressive", with the lowest paid and members of the armed forces being protected.

But those who gained the highest pensions from final-salary schemes should be expected to pay the most, Mr Osborne said

Although no detailed decision will be taken until Lord Hutton's full report is delivered next spring, Mr Osborne said he expected changes to save the government �1.8bn a year by 2014-15.

He also said that the final-salary scheme for MPs, though not formally part of Lord Hutton's review, would have to end in its current form.

At no time should you endanger yourself or others, take any unnecessary risks or infringe any laws. In most cases a selection of your comments will be published, displaying your name as you provide it and location unless you state otherwise. But your contact details will never be published.