He announced permanent reductions in spending to ensure that the UK strives to meet its fiscal targets, using some of those savings in the short term to fund infrastructure investment to generate long-term growth. Alongside this, he announced measures to help households and businesses cope with higher inflation and to ensure that deficit reduction is implemented fairly.

As result of the ongoing impact of the financial crisis, the euro area crisis, and commodity shock, the OBR expect slower growth and higher borrowing in each year of their forecast. 

In order to ensure it continues to meet its fiscal targets, the Government will:

• set plans for public spending in 2015-16 and 2016-17 in line with spending reductions over the Spending Review 2010 period
• set public sector pay awards at an average of 1 per cent for each of the two years after the current pay freeze comes to an end - Departmental budgets will be adjusted in line with the policy, with the exception of the Health and schools budgets, where savings will be recycled
• adjust the allocation of Official Development Assistance in line with the OBR's revised growth forecast, meeting the 0.7% of GNI target in 2013
•  raise the State Pension age to 67 between April 2026 and April 2028
• not increase the child element of the Child Tax Credit by more than inflation, and not up-rate the couple and lone parent elements of the Working Tax Credit by inflation next year

To complement the Bank of England's active monetary policy, the Government will launch a package of up to £21 billion to ease the flow of credit to smaller and mid-sized businesses, including:
• up to £20 billion through the National Loan Guarantee Scheme to lower the cost of bank loans for smaller businesses
• an initial £1 billion Business Finance Partnership, which will lend to mid-sized businesses and SMEs in the UK through non-bank channels 

Building on the first phase of the Growth Review, the Government is taking action to accelerate its supply side reforms to invest in infrastructure, support enterprise and lay the foundations for strong, balanced growth, including:
• £6.3 billion of additional infrastructure spending over the Spending Review period, of which £1.3 billion was announced earlier in the autumn. 

This includes:
• investing over £1 billion to tackle areas of congestion and improve the national road network
• committing £170 million of extra funding to allow more local transport projects to go ahead
• investing £100 million to create "super-connected" cities across the UK, with 80-100 megabits per second broadband and city-wide high-speed mobile connectivity
• increasing the Regional Growth Fund by £1 billion
• £600 million of funding for an estimated 100 additional Free Schools, alongside an extra £600 million for Local Authorities with the greatest pressure on school places in England
• around £1 billion of new private sector investment in regulated industries supported by government guarantee
• commitments to £5 billion of capital projects in the next Spending Review as part of the National Infrastructure Plan
• targeting up to £20 billion of private sector investment in infrastructure through a memorandum of understanding with two groups of UK pension funds and establishing the Infrastructure Investors Forum with the Association of British Insurers
• a new Seed Enterprise Investment Scheme (SEIS) from April 2012
• 100 per cent capital allowances in Sheffield, the Black Country, Liverpool, Tees Valley, North Eastern and Humber Enterprise Zones
• a new build indemnity scheme for builders and lenders to the stimulate the construction of new homes

Fairness

Fairness underpins the Government's plan to protect, rebalance and strengthen the economy. To ensure that the deficit reduction is implemented fairly, provide further support for families and businesses with high inflation, and support young people in the labour market, the Government will:
• defer the 3.02 pence per litre fuel duty increase due to take effect on 1 January 2012 to 1 August 2012; the second increase planned for 1 August 2012 will be cancelled
• increase the bank levy to 0.088 per cent from 1 January 2012, consistent with the Government's intention that it raises at least £21/2 billion each year, as set out at Budget 2011
• ensure employers making asset-backed pension contributions do not receive unintended excess tax relief
* proceed with the extension of Air Passenger Duty (APD) to flights aboard business jets, effective from April 2013 - details will be set out in the Government's response to the APD consultation on 6 December 2011
• introduce a Youth Contract worth a total of £940 million over the Spending Review period to provide wage incentives for small firms to take on young apprentices and employees
• provide extra support for 18-24 year olds through Jobcentre Plus, and an offer of Work Experience or a Sector Based Work Academy for those on Jobseeker's allowance for over three months
• fund a new £50 million a year programme to support some of our most disadvantaged 16-17 year olds into education, an Apprenticeship or a job with training
• invest a further £380 million a year by 2014-15 extending to 130,000 more disadvantaged two year olds the offer of 15 hours free education and care a week.

Extracted from official Treasury release