George Osborne has delivered his Comprehensive Spending Review with a £7bn hit on the welfare budget.
The cuts include the axing of child benefit for higher rate taxpayers.
Mr Osborne also confirmed there would be an estimated 490,000 job losses in the public sector over the next four years.
He sought to resassure the public, saying: "Much of it will be achieved through natural turnover, by leaving posts unfilled as they become vacant. Estimates suggest a turnover rate of over 8 per cent in the public sector.
"But yes, there will be some redundancies ... that is unavoidable when the country has run out of money."
The Chancellor said that departments across Whitehall face cuts.
Many Government departments face cuts. Among the biggest losers are the Home Office and the Ministry of Justice, which face annual budget cuts of 6 per cent - with policing down 4 per cent - while the Foreign Office will lose 24 per cent over the next four years.
Overall, the Department for Education will be required to find resource savings of only 1 per cent a year and the schools budget will rise to £39bn.
Mr Osborne pledged to maintain universal benefits for pensioners including free eye tests, prescription charges, bus passes, TV licences for the over 75s and winter fuel payments.
The state pension age to 66 would be brought forward to 2020.
Shadow chancellor Alan Johnson accused the Government of taking a "reckless gamble with people's livelihoods" which could wreck the economic recovery.
Amid noisy scenes in the Commons he declared: "We've seen people cheering the deepest cuts to public spending in living memory.
"For some members opposite this is their ideological objective ... this is what they came into politics for."
