BREAKING NEWS from the Comprehensive Spending Review

Mr Osborne also confirmed that all disadvantaged two-year-olds would receive 15 hours a week of nursery care, ‘so they will be ready like the rest of their classmates for school.’

Spending on education will also rise in real terms every year, he said.

‘The real increase in money for schools’ would mean that spending would rise from £35billion to £39 bn next year. Different elements of the education budget would no longer be ring-fenced, he said.

However, families will receive less financial support from tax credits to help pay for childcare.

Although the Chancellor said that tax credits would be frozen and low-income families would be protected from the ‘adverse effects’ of the cuts, he said that ‘the childcare element of the working tax credit will return to the 70 per cent level’.

Currently families are entitled to receive up to 80 per cent of their childcare costs paid for by working tax credit (WTC).

As part of plans to cut back the welfare budget, the Chancellor also announced that welfare benefits would be replaced by ‘a single, simple, universal credit’, so that it would always ‘pay to work’. The new universal credit will be introduced over the next two parliaments.

Mr Osborne stood by his decision to remove child benefit from higher-rate taxpayers but said that the move meant that there would be no further cuts to child benefit, which will remain available for other households with children from birth to the age of 18 or 19.

The ring-fencing of all local government spending will end from 2011, apart from ‘schools, the police and the fire service’.

The Chancellor said that there would be an expansion of personal budgets for children with special educational needs and disabled children.

Train to Gain will be abolished but the number of adult apprenticeships will be increased.