Spending Review: Education department's children's services budget cut by 12 per cent over four years

Delivering the comprehensive spending review to parliament, Osborne told MPs that the DfE will benefit from kinder cuts than other government departments.

"We wanted to see if it was possible – even when spending was being cut – to find more resources for our schools and for the early years education of our children," he said. 

"I can tell the House that we have succeeded. It has meant other departments taking bigger cuts. But I believe strongly that this is the right choice for our country’s future."

Overall, the DfE will need to make cuts of one per cent per year, which equates to more than £550m each year. Additionally, the DfE’s central administration budget will be cut by a third.

Sir Paul Ennals, chief executive of the National Children’s Bureau, said that for children and young people’s services while still serious, the cut of 12 per cent over the four-year spending review period is better than many expected.

He said: "It is not as bad as it might have been. [The government] built us up for a catastrophe so the cuts are not as deep as we feared."

Osborne said savings will be achieved through cutting back on education maintenance allowance (EMA) payments for all but the most disadvantaged learners, as well as "rationalising and ending" some central programmes for children, young people and families, among other measures.

"We must leave no stone unturned in our search for waste and we must deliver the changes necessary to make our public services fit for the modern age," the Chancellor said.

In terms of spending on local government, Osborne confirmed that the ringfencing of all local government revenue grants will end from April next year.

"The only exception will be simplified schools' grants and a public health grant," he explained.

"Outside of schools, police and the fire service, the number of separate core grants that go to local authorities will be reduced from more than 90 to fewer than 10.

Overall, local authority finances wll be cut by 30 per cent, in real terms, by 2014/15.

"Councils and their leaders will remain accountable – but they will no longer have to report on 4,700 local area agreement targets."