George Osborne is setting out spending plans for beyond the next election as he draws the battle lines before the country goes to the polls in 2015.
The Chancellor is outlining how he will slice £11.5bn from Whitehall department budgets, extending the age of austerity into the next parliament.
In his last spending review in 2010, Mr Osborne set out plans to eliminate the deficit by 2015 - allowing the cuts to end in time for the election.
But sluggish economic growth and a rising deficit have forced him to impose further drastic savings for 2015/16.
Mr Osborne said his actions had "taken over economy back from the brink of bankruptcy" and declared Britain was emerging from "intensive care".
George Osborne and Danny Alexander leaving the Treasury on Wednesday But he said "challenges from abroad" such as the eurozone crisis meant the country has to continue to make savings.
Ministers face cuts of 8% on average, although health, schools and overseas aid are still ringfenced - forcing deeper reductions in other areas.
Mr Osborne revealed the Treasury, Cabinet Office and Department of Communities and Local Government have all agreed to extra savings of 10%.
The public sector faces a further squeeze, with pay rises limited to up to 1% on average for 2015/16 and automatic pay progression scrapped for all but those in the armed forces.
According to the Office for Budget Responsibility, another 144,000 people working for the Government will also lose their jobs by the start of the next parliament.
Thousands of ex-pat pensioners face losing their winter fuel payments and further details will be announced about a planned welfare cap.
There will be some positive news as billions more is pledged for key infrastructure projects over the next five years, further details of which will come on Thursday.
More than £3billion in capital investment will go on affordable housing, Mr Osborne said.
And counter-terrorism is being given a rare cash boost, with MI5, MI6 and GCHQ seeing a 3% rise in its budget worth £15bn over five years.
The Commons statement is highly political, coming less than two years before the next election and outlining plans for a time he hopes the Tories will be in power alone.
Mr Osborne will say: "I know that times are still not easy for families. But we have a clear economic plan. We've stuck to it. It is working. And I'm determined to go on delivering it."
Labour claims the Government will go into 2015 with state debt at £96bn and has pushed borrowing up by £245bn more than planned at the last spending review.
However leader Ed Miliband has said he cannot promise to reverse any of the cuts in day-to-day spending announced by Mr Osborne if he wins the next election.
More to follow...
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