Yahoo Finance Osborne: More Defence Cuts To Come
The Chancellor says he has agreed a deal over the defence budget, but it will involve some "tough choices" - and civilian job losses.
George Osborne has revealed he settled with the Defence Secretary Phillip Hammond on Saturday night, and is making progress with other departments.
He also confirmed that he plans to use the £250m paid by the banks over the Libor scandal to help wounded service personnel.
Mr Osborne will deliver his spending review on Wednesday. He is expected to say that the British economy is "moving from rescue to recovery", while setting out £11.5bn of cuts in Government departments in the year after the next General Election.
Speaking on the BBC's Andrew Marr Show, Mr Osborne said: "I have settled the defence department, which people thought was going to be one of the biggest and most difficult challenges, so I have agreed with Philip Hammond a defence budget.
"It's going to involve some tough choices. The civilian head count is going to have to reduce in our defence department, we are going to have to renegotiate, with some of our big suppliers, the contracts.
"But I can tell you there will not be a reduction in our military capability, we are not going to reduce the number of our sailors, soldiers and airmen.
"In fact we are going to be able to spend some more money on things like cyber, which is the new frontier in defence."
The Chancellor also confirmed plans to use fines from the banks to support wounded British troops and veterans.
"So the people who demonstrated the very worst of British values in the Libor scandal, in the City, are now supporting those who have demonstrated the very best of British values - our soldiers who gave so much to defend the country," Mr Osborne said.
Mr Osborne said the Prime Minister's pledge before the last election to protect winter fuel payments for all pensioners applied to this parliament - but did not confirm that it would extend beyond the 2015 poll.
He said: "All those pensioner benefits, not the basic state pension, all those other pensioner benefits of course we have got to look at how we can afford them."
Alongside the cuts, the Chancellor will announce plans for an infrastructure plan to "power Britain back into the economic premier league", using savings to invest in roads, railways, education and science.
Final details of the spending review are still being worked out and Mr Osborne confirmed that some ministries, including Vince Cable's Business Department, are yet to agree their settlements.
Mr Osborne is expected to tell MPs on Wednesday: "Britain is moving from rescue to recovery. But while the British economy is leaving intensive care; now we need to secure that recovery.
"Full recovery won't be easy but I won't let up in my determination to put right what went so badly wrong."
Mr Osborne has come under pressure to invest in capital projects in order to help the fragile recovery and he will give details of "a long term infrastructure plan".
He will say: "We're saving money on welfare and waste to invest in the roads and railways, schooling and science our economy needs to succeed in the future.
"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. Now (Other OTC: NWPN - news) , together, we're moving Britain from rescue to recovery let's build an economy that works for everyone."
Shadow chancellor Ed Balls urged Mr Osborne to pump money into the economy now in order to reduce the need for cuts in two years' time.
Writing in the Sunday Mirror, he said: "Instead of planning more cuts two years ahead, they should use this week's spending review to boost growth and living standards this year and next year.
"More growth now would bring in more tax revenues and mean our public services would not face such deep cuts in 2015."
He said the Government should boost lending to businesses with a new British Investment Bank and reintroduce the 10p income tax band.
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