Spending Review: George Osborne takes an axe to the State Chancellor slashes overall benefits budget by a further £11.5billion He also introduces seven-day wait before claimants can sign on And all foreign benefits claimants must learn English to acceptable level Civil servants lost automatic pay rises as further 144,000 public posts axed 'We will not let up,' Osborne tells the Commons. The reform will continue War on the welfare state: Chancellor George Osborne in the Commons yesterday where he announced a further £11.5billion cut to benefits George Osborne went to war on the bloated welfare state and public sector wage bill yesterday. Savaging the "vested interests" that have opposed his spending cuts so far, the Chancellor put benefit cuts at the heart of the next election campaign. He set out plans to extend austerity into the next Parliament with £11.5 billion in fresh reductions, making it a key battleground for the general election in 2015. He announced a new cap on the overall welfare bill, a requirement for foreign benefit claimants to learn English and a seven-day wait before the jobless can sign on. The pain for millions of workers in the public sector will continue as they lose automatic pay rises awarded for time served. Another 144,000 jobs will be axed. However, government spending will still account for 43.1 per cent of national output in 2015/16 - little change from the 43.6 per cent of 2012. Other key announcements yesterday included: An extra £18billion for roads, railways, energy schemes and housing to try to boost the recovery; Council tax frozen for the next two years but another 10 per cent hit on local authority budgets; The NHS, schools in England and foreign aid will continue to be protected from austerity measures; 180 new "free schools" and a radical reform of education funding to eliminate bias against the Tory shires; A new £3.8billion joint budget, which the NHS will share with councils to organise elderly care; Troop numbers and military equipment protected, but thousands more civilian defence job cuts; A "temperature test" to stop ex-pats in hot countries claiming winter fuel allowance. 'The reform will continue': Osborne announced a new cap on the overall welfare bill, a requirement for foreign benefit claimants to learn English and a seven-day wait before the jobless can sign on Insisting Britain would face ruin unless it accepted a further period of austerity, Mr Osborne said he was taking action "to secure the recovery." "While recovery from such a deep recession can never be straightforward, Britain is moving out of intensive care - and from rescue to recovery," he said. The Chancellor fiercely attacked Labour and the unions, telling MPs: "Every step of the way, every penny saved, every programme reformed, every entitlement reduced, every difficult choice taken, has been opposed by vested interests and those who got Britain into this mess in the first place. We will not let up. I will not let that happen. The reform will continue. At the heart of yesterday's spending review was the Chancellor's argument that it is possible to roll back the state and get better public services at lower cost. He pointed to police reform and immigration where, despite lower budgets, crime and net migration have fallen dramatically. What was the prediction from the opposition three years ago? Crime would rise. And what has happened instead? Crime is at its lowest level for 30 years, net migration down by more than a third," Mr Osborne said. The Home Secretary is demonstrating that responsible budgets and reform can deliver better services for the public. Less money for better services? To back up his economic argument The Chancellor pointed to police reform and immigration where, despite lower budgetss, crime and net migration have fallen dramatically Public spending, the Chancellor insisted, does not create sustainable growth. "Enterprise does," he said. And the job of the state is to provide the schools, science, transport links and reliable energy that enable business to grow. Britain was once the place where the future was invented: from the railway to jet engine to the world wide web. We can be that country again. Got off lightly: Vince Cable's Business Department got off relatively lightly with cuts of 6 per cent and a big increase in science spending He said the Coalition had reduced the deficit by a third, put a record number of people into work and brought the economy back from the brink of bankruptcy. He confirmed total expenditure would continue to fall in real terms at the same rate as it is doing today, reaching £745billion in 2015. But the economic downturn has meant higher than expected debt interest payments and welfare payments, even though spending is being slashed in most government departments. The Department for Communities and Local Government, the Treasury and the Department for Environment, Food and Rural Affairs were among the hardest hit in the latest spending round, with 10 per cent budget cuts in 2015/16. Vince Cable's Business Department, the last to reach a deal with the Treasury after tough negotiations, got off relatively lightly with cuts of 6 per cent and a big increase in science spending. However, student grants will be frozen. Labour had previously suggested it would not reverse the spending cuts announced for 2015-16, although it would borrow money to invest in infrastructure spending. But yesterday Shadow Chancellor Ed Balls said that "in terms of the overall numbers of 15-16, I think the cuts are deeper than they need to be." Mr Balls attacked an "out-of-touch Chancellor" who had "failed on living standards, growth and the deficit, and families and businesses are paying the price for his failure." "If the Chancellor continues with his failing economic plan, then it will fall to the next Labour government to turn the economy round and to take the tough decisions to get the deficit down in a fair way," he said. Not impressed: Shadow chancellor Ed Balls, centre, attacked an 'out-of-touch Chancellor' who had 'failed on living standards, growth and the deficit, and families and businesses are paying the price for his failure' Labour suggested that it would back English language tests for migrants and would "look at the detail" of other benefit changes. Paul Johnson, of the Institute for Fiscal Studies, said there was a "good chance" that whoever wins the election will put up taxes rather than pursuing even more spending cuts. Much spending would be one third or more down in real terms from 2010 if austerity continued at the same pace until 2017, he said. "The scale of the cuts are really astonishing," Mr Johnson said. Graeme Leach, chief economist at the Institute of Directors, said: "The spending review leaves business feeling like Oliver Twist - more please, Chancellor. Please could you go further and faster with spending restraint? Please could you shift even more expenditure from current spending towards infrastructure? Please could you widen the welfare cap to include pensions? But please could you also do less ring-fencing of spending in departments such as the NHS? But Len McCluskey, general secretary of the Unite union, said: "George Osborne's comprehensive spending review offers no hope and no growth and will cast the UK into economic gloom for the next decade."