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After months of phoney war, George Osborne has detailed the coalition's battle plan to beat Britain's £109bn deficit, confirming hundreds of thousands of casualties across the public sector.

The Chancellor also announced sweeping reforms to the welfare system, saying "fairness" is the government's guiding principle.

Osborne announced:

  • A 490,000 reduction in civil service jobs over four years, mostly by not filling vacancies, but "there will be some redundancies".
  • Total Royal household spending cut by 14 per cent by 2014.
  • Cuts to central funding of councils of 7.1 per cent per year for four years.
  • Higher rents for new social housing tenants.
  • A 24 per cent cut in the Foreign Office budget over four years.
  • Police spending cut by four per cent per year over four years.
  • Counter-terrorism and intelligence budgets protected.
  • Savings on Home Office and Ministry of justice budgets of six per cent per year, with a plans for a new prison suspended.
  • Cuts to legal aid.
  • Plan to extract "maximum sustainable tax revenues" from banks, including permanent levy.
  • An extra £900m to be spent pursuing tax evaders.
  • State pension age for men and women to reach 66 by 2020.
  • Higher employee contributions to public service pensions.
  • All working age benefits and tax credits replaced with a single payment.
  • New restrictions on housing and council tax benefits to save £7bn per year, on top of £11bn savings already announced.
  • Child benefit withdrawn from higher rate taxpayers, as previously announced.
  • Pensioners' benefits maintained.
  • NHS protected but will make £20bn savings, to be reinvested in health.
  • A 50 per cent increase in apprenticeship funding.
  • Science budget protected at £4.6bn per year.
  • Up to £1bn to be invested in a carbon capture pilot project.
  • BBC World Service to be funded from the licence fee rather than the Foreign Office.
  • Licence fee frozen for the next six years.
  • Cap on train fare increased, raised to inflation plus three per cent.
  • School resources protected.

"The decisions we have taken today bring sanity to our public finances," said Osborne.

"We've taken our country back from the brink of bankruptcy."

The average savings in departmental budgets will be 19 per cent, lower than the 25 per cent anticipated in June's emergency budget.

The full Spending Review is here. ®

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