Chancellor of the Exchequer George Osborne rose to deliver his statement at 12.31pm saying: "Today is the day we step back from the brink."

He said he would set out a four-year plan to put public services and the welfare state on a sustainable footing for the long term.

Britain has the largest structural budget deficit in Europe at £109 billion, he said, and is paying £43 billion a year in debt interest.

Today's spending plans achieve a balanced structural current budget and falling national debt in the period to 2014/15, he said.

Next year, current expenditure will be £651 billion, then £665 billion the year after, £679 billion the year after that, before reaching £693 billion in 2014/15, as set out in the Budget in June.

Debt interest payments will be lower by £1 billion in 2012, £1.8 billion in 2013 and £3 billion in 2014, a total of £5 billion over the course of the spending review.

Capital spending will be £51 billion next year, then £49 billion, then £46 billion and £47 billion in 2014/15, about £2 billion a year higher than set out in the Budget.

Total public expenditure will be £702 billion next year, then £713 billion, £724 billion and £740 billion in 2014/15.

The Chancellor said he applied three principles to spending choices - reform, fairness and growth.

The Government will deliver £6 billion of Whitehall savings - double the £3 billion promised earlier.

The best estimate of the reduction in total public sector jobs is the Office for Budget Responsibility forecast of 490,000 over the four years of the spending review period.

Spending Review - official Treasury documents

There will be some redundancies in the public sector, which is unavoidable when the country has run out of money, said Mr Osborne.

The core Cabinet Office budget will be reduced by £55 million by 2014/15.

The Treasury will see its overall budget reduced by 33 per cent and the department's building will be shared with part of the Cabinet Office.

Total Royal Household spending will fall by 14 per cent in 2012/13, while grants to the Household will be frozen in cash terms with a temporary additional facility of £1 million to support the costs of the Diamond Jubilee.

After that, the Royal Household will receive a new sovereign support grant linked to a portion of the revenue of the Crown Estate.

There will be overall savings in funding to local councils of 7.1 per cent, but ring-fencing of all local government revenue grants will end from April next year, except for simplified schools grants and a public health grant.

Local government grant funding for social care to increase by an additional £1 billion by the fourth year of the review and a further £1 billion for social care will come through the NHS to support joint working with councils.

Terms for existing social housing tenants and their rent will be unchanged, with new tenants offered intermediate rents at around 80 per cent of the market rent. The Chancellor forecast this would allow the building of up to 150,000 new affordable homes over the next four years.

The Ministry of Defence budget will reach £33.5 billion in 2014/15, a saving of 8 per cent, he confirmed.

The Foreign Office budget will see savings of 24 per cent through a sharp reduction in the number of Whitehall-based diplomats and back office functions.

The Department for International Development's budget will rise to £11.5 billion over the next four years, reaching 0.7 per cent of national income in 2013.

Police spending will fall by 4 per cent each year of the spending settlement, with the aim of avoiding any reduction in the visibility and availability of police in our streets.

The Home Office budget will find savings of an average of 6 per cent a year, as will the Ministry of Justice's budget.

The Law Officers Department will reduce its budget by a total of 24 per cent over the review period, with the Crown Prosecution Service greatly reducing its cost base.

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

Those on the highest incomes will contribute more towards the fiscal consolidation, not just in cash terms but also as a proportion of their income and consumption of public services combined.

Legislation to introduce a permanent tax levy on banks will be published tomorrow.

HM Revenue and Customs budget will be expected to find resource savings of 15 per cent he better use of new technology and greater efficiency, while spending £900 million more on targeting tax evasion and fraud to help collect a missing £7 billion in tax revenues.

The state pension age for men and women will reach 66 by the year 2020, saving over £5 billion a year by the end of the next Parliament.

Government to consult on changes to contribution discount rates to public pensions, with the aim of saving £1.8 billion per year in the cost of public service pensions by 2014/15.

Proposals will be set out to replace all working-age benefits and tax credits with a single, simple Universal Credit.

Local authorities to get greater flexibility to manage Council Tax and direct control over Council Tax Benefit within an overall budget that will be reduced by 10 per cent by April 2013.

Government will freeze the maximum savings credit award in Pension Credit for four years and further control the cost of tax credits by freezing the basic and 30-hour elements for three years and change the Working Tax Credit rules so couples with children must work 24 hours per week between them.

A benefits cap together with all other welfare measures will save £7 billion a year.

The child element of the Child Tax Credit will be increased by £30 in 2011/12 and £50 in 2012/13 above indexation, meaning annual increases of £180 and then £110 above the level promised by Labour., said Mr Osborne.

Child Benefit to be removed from families with a higher-rate taxpayer, saving £2.5 billion a year. Child Benefit will continue to be paid until a child leaves full-time education at the age of 18 or even 19.

Universal benefits for pensioners will be retained exactly as budgeted for by the previous government and the temporary increase in the Cold Weather Payment will be made permanent.

Total health spending to rise each year over and above inflation from £104 billion this year to £114 billion by the end of the next four years.

Administration in the Department for Business, Innovation and Skills will be cut by £400 million, 24 quangos will be cut and low-priority programmes like Train to Gain will be abolished.

Investment in adult apprenticeships will help 75,000 new apprentices a year by the end of the spending review period.

Average annual savings of 7.1 per cent will be found from the Department for Business budget but the science budget will be protected with no cash cut, leaving it at £4.6 billion a year.

The Green Investment Bank will go ahead with £1 billion of funding in the spending review.

Settlement for the Department for Energy and Climate Change will fall by an average 5 per cent a year. Defra will deliver resource savings of an average 8 per cent a year.

Department of Culture, Media and Sport budget will come down to £1.1 billion by 2014/15, with administrative costs reduced by 41 per cent. Free entry to museums and galleries will remain.

BBC to fund BBC World Service and BBC Monitor as well as part-funding S4C, saving the Treasury £340 million a year, with the licence fee frozen for the next six years - equivalent to a 16 per cent saving in the BBC budget over the period.

£30 billion to be invested in transport projects over the next four years, including £14 billion to fund maintenance and investment in railways.

The cap on regulated rail fares will rise to RPI plus 3 per cent for the three years from 2012, to help pay for new rolling stock and improve passenger conditions.

The Regional Growth Fund will receive close to half a billion pounds extra in the third year of the review period.

There will be a real increase in money for schools for each of the next four years. The schools budget will rise from £35 billion to £39 billion.

A new £2.5 billion pupil premium to support the education of disadvantaged children will be introduced.

Sure Start services will be protected in cash terms and 15 free hours of early education and care for all disadvantaged two-year-olds will be introduced.

The Department for Education will be required to find resource savings of only 1 per cent a year, central administration will be cut by a third and five quangos will go.

Average saving in departmental budgets will be lower than the previous government implied, with cuts of 19 per cent over four years instead of 20 per cent, said Mr Osborne.

The Chancellor concluded his statement and sat down at 1.33pm.

In reply, Shadow chancellor Alan Johnson warned the cuts announced in the CSR could end up ''stifling'' the economic recovery.

During raucous Commons exchanges he accused Tory backbenchers of cheering ''the deepest cuts to public spending in living memory''.

For some on the Government benches it was an ''ideological objective,'' he claimed.

The shadow chancellor acknowledged the ''deficit has to be paid down'' but said: ''Today's reckless gamble with people's livelihoods runs the risk of stifling the fragile recovery.''

Mr Johnson said: ''We have seen people cheering the deepest cuts to public spending in living memory.

''For some members opposite, this is their ideological objective. Not all of them, but for many of them, this is what they came in politics for.''

He added that the announcements would affect ''people's futures, people's jobs, people's pensions, people's services, their prospects for the future''.

He accused the Government of being ''deficit deceivers'' who ''peddled a whole series of myths to the British public'' about the nation's finances.

''The most incredible myth of all is that the global economic crisis since the Great Depression is the fault of the previous government,'' he said.

The shadow chancellor said that when the crisis hit Britain's debt was the second lowest of any G7 country, that debt interest levels were 15 per cent lower than when Labour came to office and the interest rates on UK debt had been falling since the beginning of the year.

At the time of the last CSR in 2007 Mr Osborne had argued ''we were spending too little,'' Mr Johnson said.

Mr Johnson said it was ''ridiculous'' to compare Government spending to running up credit card debts.

''If countries around the world hadn't run up debts - that's what the fiscal deficit is, by the way - if they hadn't run up debts to sustain their economies, people would have not lost their credit cards, they'd have lost their jobs, they'd have lost their houses, they would have lost their savings,'' he said.

The Liberal Democrats had made that point during the election campaign, he added.

He attacked the Liberal Democrats for having changed their minds on the need for fast and deep cuts, saying they had all campaigned at the general election on the basis that in the context of the deficit ''speed kills''.

And he hit out at Nick Clegg, saying: ''In the period between the ballot box closing and his ministerial car door opening, the Deputy Prime Minister discovered a different approach to this.''

After asking a series of questions, Mr Johnson said the spending review was ''not about economic necessity, it's about political choices''.

Labour were looking for a ''much more gradual, much slower reduction that did not stifle the very, very low levels of growth that we have in our economy''.

And he said: ''It's our firm belief that the rush to cut the deficit endangers the recovery and reduces the prospects for employment in the short term and for prosperity in the longer term.

''We believe we can and should sustain a more gradual reduction, securing growth.

''I don't believe that the Prime Minister or the Chancellor sufficiently understand the worries and concerns of families up and down this country - and I think those worries will have multiplied considerably as a result of his statement today.''