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George Osborne: '"It will always pay to work"
<!-- END - caption -->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 levyMr 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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