It’s been a long time coming, but this afternoon Chancellor George Osborne told the House of Commons that today was the day that Britain stepped back from the brink of bankruptcy and economic ruin, writes John Hipwood.

Soon he could become the most despised man in Britain, but this was Mr Osborne’s chance to stand at the Commons despatch box to tell it like it is.

He warned the people of Britain that he was sending them on a hard road, but it was one which would lead them to a better future.

We all hope he is right because he confirmed forecasts that nearly half a million public sector jobs will go over the next four years. One of them could be his, but he’ll be OK, his critics point out, because he’s loaded.

That’s 490,000 husbands, wives, mums, dads, sons, daughters, boyfriends, girlfriends. The list could go on forever.

Everybody knows someone who relies on the income or council taxpayer for their wages.

That’s 490,000 more people not paying income tax and claiming jobseeker’s allowances. The economics of Mr Osborne’s spending cuts are frightening.

Desperate

But it’s not just the desperate financial circumstances that matter for people who lose their jobs.

Everyone who goes out to work to earn their daily crust knows whether he or she has done a good job, whether their jobs are worthwhile.

Take the Harrier pilot, Kris Ward, who tackled David Cameron yesterday about the prospect of him joining his fighter plane on the scrapheap; take the police officer, soldier, sailor, binman, civil servant.

Another list which could go on and on.

It’s happening in the world of private business all the time, of course.

Ask the skilled former worker at Longbridge, ask the hard-working former manager of a Woolworths store.

So if the forecasts are correct and there are indeed as many as half a million job losses over the next four years, that’s millions of voters, when you count friends and family, who might harbour sufficient resentment to take it out on Mr Osborne, David Cameron, Nick Clegg & Co.

And there will be further anger aimed their way from people who lose their invalidity, housing and other welfare benefits.

That’s the risk the Chancellor was taking today, but he was clear in his own mind that anything less than the cuts package he presented to MPs was an even greater risk to the UK economy, eventually leading to even more job losses in both the public and private sector as the Government finds it harder to pay off its debts and the international markets lose faith.

Mr Osborne rubber-stamped the Office of Budget Responsibility’s forecast that 490,000 public sector jobs would be lost “over four years not overnight”, and he acepted that there would have to be redundancies.

Sustainable

“That’s unavoidable when the country has run out of money,” he said.

As he delivered his Comprehensive Spending Review, Mr Osbourne pledged he would set out a four-year plan to put public services and the welfare state on a sustainable footing for the long term.

He told the House of Commons that Britain had the largest structural budget deficit in Europe at £109 billion.

He said the UK was paying £43 billion a year in debt interest.

The Chancellor said next year expenditure would be set at £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 would 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, he said.

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.

And he announced that the Government will deliver £6 billion of Whitehall savings – double the £3 billion promised earlier.

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.

Housing

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 eight per cent, the Chancellor 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 four 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 six 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.

Pensions

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 through the 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.

The 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.

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. 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.

The temporary increase in the Cold Weather Payment will be made permanent.

Flexibility

Local authorities will 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 from April 2013.

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

Scotland, Wales and Northern Ireland will see cash rises in their devolved budgets, although below the rate of inflation.

Scotland’s budget will rise to £25.4 billion in 2014/15, Wales to £13.5 billion and Northern Ireland to £9.5 billion.

Equitable Life policy-holders will receive a total payout in the region of £1.5 billion. The scheme will start making payments next year.

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 five per cent a year.

Defra will deliver resource savings of an average eight per cent a year.

Special Report By John Hipwood