Millions of public sector workers will lose automatic annual pay increases as part of an £11.5bn cuts package unveiled by Chancellor George Osborne.
He also announced a cap on total welfare spending and axed winter fuel payments for expatriate pensioners in hot countries from 2015.
Most unemployed people will have to visit the job centre every week instead of fortnightly.
The cuts package will cover a single financial year - 2015/16.
It was forced on the chancellor by slower than expected economic growth and deficit reduction but he insisted the economy was on the right track, telling MPs: "Britain is moving out of intensive care and moving from rescue to recovery."
But shadow chancellor Ed Balls, for Labour, said the new round of cuts represented a "comprehensive failure" of Mr Osborne's economic strategy.
Other key announcements from the chancellor's statement include:
There will be a cap on the total amount the government spends on welfare, including housing benefit, disability benefit, tax credits and pensioner benefits - but excluding the state pension
The Department for Communities and Local Government, the Treasury and the Department for the Environment and Rural Affairs were all hit with 10% cuts
The Home Office must save 6% from its budget - but the police budget will be cut by a lower 4.9% and counter terror policing will be spared
The culture department escapes the worst of the cuts with expected savings of 7%
Science and research funding will remain flat
The security services were the biggest winners, with a 3.4% boost to funding, with Mr Osborne praising their "heroic" efforts to "protect us and our way of life"
Mr Osborne said the cuts, which will kick in shortly before the next general election, would ensure Britain "lives within its means", but they would be guided by fairness, growth and reform.
He announced that annual incremental pay increases in the civil service would be axed in 2015 and a fresh push made to remove automatic pay rises for time served in NHS, prisons and police. The armed forces will be excluded from the changes.
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Guide to the Spending Review
Government departments set out spending for set period of time
George Osborne needs to find £11.5bn in savings
The 2015-16 timetable is designed to last a little while beyond the next general election
Key points: At-a-glance
Q&A: Spending Review
He told MPs: "Progression pay can at best be described as antiquated; at worst, it's deeply unfair to other parts of the public sector who don't get it and to the private sector who have to pay for it."
And he announced a tougher regime for job seekers, saying they will have to visit the JobCentre every week to spend more time with advisors. There will also be a seven day wait before people can initially claim benefits.
"Those first few days should be spent looking for work, not looking to sign on," said Mr Osborne.
"We're doing these things because we know they help people stay off benefits and help those on benefits get back into work faster."
In a further change, claimants who cannot speak English "will have to attend language courses until they do".
Mr Osborne confirmed that the health service, schools in England and foreign aid would continue to be protected from budget cuts.
But that means all other departments will have to take a bigger hit, with average budget cuts for 2015/16 of between 8% and 10%.
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This is a chancellor with his eye firmly set on 2015 - not just the year of the next set of spending cuts but of the next general election.”
Nick RobinsonPolitical editor
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Vince Cable's business department - the last to reach a deal with Mr Osborne after tough negotiations - got off relatively lightly with cuts of 6% and a commitment to keep money for more apprenticeships, but student grants will be frozen.
The Ministry of Defence will face further cuts to its civilian workforce as its budget was maintained in cash terms at £24bn - representing a real terms cut.
The transport department will be forced to make savings of 9% in day-to-day spending, but will get the largest boost of any department in its capital spending, which rises to £9.5bn in 2015/16.
Mr Osborne also said the government would spend £2m to "look at the case for" a £12bn Crossrail 2 project in London, which is backed by London Mayor Boris Johnson, and announced £3bn more for affordable housing in 2015. Further details of new capital spending are expected on Thursday.
He announced that the council tax freeze, due to come to an end next April, would be extended for the next two years. He said that would mean nearly £100 off the average council tax bill for families.
But he warned of further large scale public sector job cuts and said local councils would have to make "the kind of sacrifices central government is making".
Sir Merrick Cockell, chairman of the Local Government Association, said further cuts would "stretch essential services to breaking point in many areas".
'Out of touch'
Labour has said it will not reverse the spending cuts announced for 2015/16 although it will borrow money to invest in building more houses.
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But Mr Balls launched a fierce attack on the "out of touch chancellor" who, he said, has "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," added Mr Balls.
Trade unions reacted angrily to the public sector pay squeeze, with Brian Strutton, of the GMB, saying: "This is just another unpleasant dig at public sector workers who have already been made scapegoats for problems they had nothing to do with."
But business lobby group the CBI said the squeeze was "tough but necessary" at a time of tight public finances and it was also "encouraging to see that government will have greater control of the welfare budget through the new cap".