Chancellor George Osborne has announced public spending cuts of £81bn over four years, telling MPs that the programme would restore "sanity to our public finances and stability to our economy".
He said that the cuts were guided by fairness, reform and growth, but he confirmed that up to 500,000 public sector jobs could go by 2014-15 as a result, according to the Office for Budgetary Responsibility.
On 20 October 2010, giving details of the Spending Review to MPs, Mr Osborne said that the state pension age would rise to 66 for men and women, some incapacity benefits would 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 21 October.
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, the chancellor told MPs.
Mr Osborne concluded: "It is a hard road, but it leads to a better future."
Shadow chancellor Alan Johnson acknowledged the "deficit has to be paid down", but he added: "Today's reckless gamble with people's livelihoods runs the risk of stifling the fragile recovery."
He also criticised the reaction of government backbenchers to the announcement.
"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 into politics for."