Demonstrators gathered in Downing Street on Wednesday to voice their anger at the cuts
Chancellor George Osborne will defend his £81bn UK spending cuts later amid Labour claims that they are reckless and will hit some of the poorest hard.
The independent Institute for Fiscal Studies has also said the cuts may not be enough if the budget deficit turns out to be worse than feared.
The UK faces its biggest spending cuts for decades over the next four years.
The government says that changes to tax, benefits and public services will mean the richest contribute the most.
Mr Osborne told MPs on Wednesday that he had acted to restore “sanity to our public finances” and deal “decisively” with Britain’s record peacetime deficit.
The government says public debt interest repayments now total £120m a day, or £43bn a year.
Mr Osborne will face a round of interviews later to explain his decisions in the Spending Review, which, according to the Institute for Fiscal Studies (IFS) think tank, represent the deepest six-year period of cuts since the 1970s – not since World War II as previous plans implied.
The chancellor said he had been able to restrict departmental spending cuts to an average of 19% over four years – not the 20% he said Labour had planned – because of “tough but fair decisions to reform welfare, and the savings we’ve made on debt interest”.
He unveiled plans to cut a further £7bn from the welfare budget – on top of £11bn of cuts already announced – which include putting a time limit on some incapacity benefits and changes to tax credits and housing benefit.
He also announced that the state pension would rise to 66 for both men and women in 2020 – six years earlier than planned – and there would be a £3.5bn increase in public sector employee pension contributions.
They were unveiled alongside other changes, including a permanent bank levy, tax changes and cuts to child benefit for higher earners.
Mr Osborne said “those with the broadest shoulders should bear the greatest burden. Those with the most should pay the most, including our banks”.
Banks will find out later how a new levy on their finances will operate.
However, Labour said the Treasury’s own figures showed that the poorest 10% of people would pay more to reduce the deficit than everyone other than the richest 10%.
Shadow chief secretary to the Treasury Angela Eagle told BBC Two’s Newsnight: “What we have got here is not actually a blueprint for recovery, it is not actually a plan for a big society.
“When you look at it, it is the state retreating. It is a blueprint for a smaller, meaner and nastier society and we think the government has got it wrong.”
Shadow Chancellor Alan Johnson, who labelled the cuts a “reckless gamble with people’s livelihoods”, said there were “serious unanswered questions on how many jobs will be lost and how much the redundancies will cost the taxpayer”.
IFS acting director Carl Emmerson told Channel 4 News: “The benefit cuts we heard about today – an extra £7bn – on average will impact those in the bottom half of the income distribution more than the top half of the income distribution. Therefore, they are regressive.”
He added that the best estimate suggested that the poorest 50% would also be hit harder by public service cuts.
The IFS also suggested it was still “quite possible” that the chancellor would have to make further spending cuts or put up tax in order to meet his target for tackling the deficit – if it turns out to be larger than the official estimate.
However, the Fitch ratings agency said Mr Osborne’s measures should help the UK retain its prized triple A credit rating.
Mr Osborne said the cuts were guided by fairness, reform and growth: “There have been some difficult decisions on welfare but I have sought to protect the most vulnerable and I think our overall welfare reforms will help give incentives to many in our country who currently don’t have them to seek employment.”
The main new welfare savings come from abolishing Employment and Support Allowance, which replaces incapacity benefit, for some categories of claimant after one year, raising £2bn.
Universal benefits for pensioners will be retained as budgeted for by the previous government and the temporary increase in the cold weather payment will be made permanent.
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