Public sector workers, benefit claimants and expat pensioners were hit today as Chancellor George Osborne announced another round of austerity measures.
He claimed that Britain was "moving out of intensive care - and from rescue to recovery".
But as he cut £11.5 billion in spending, he said balancing the nation's books involved "difficult decisions", adding: "There never was an easy way to bring spending under control."
Shadow Chancellor Ed Balls said the new round of cuts represented a "comprehensive failure" of the Chancellor's economic strategy.
Mr Balls said: "This out of touch Chancellor has failed on living standards, growth and the deficit and families and businesses are paying the price for his failure."
But Mr Osborne insisted his measures, which only spared schools, the NHS, overseas aid and the intelligence services, were necessary and fair.
Mr Osborne gave further details of his planned welfare cap, which will come into force in April 2015 - a month before the next general election.
Housing benefit, tax credits, disability benefits and pensioner benefits will all be included although the state pension will not.
The Chancellor said public sector pay rises will be limited to an average of up to one per cent for 2015-16 and automatic progression pay and re-grading were being scrapped.
He said: "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.
"So we will end automatic progression pay in the Civil Service by 2015-16.
"And we are working to remove automatic pay rises simply for time served in our schools, NHS, prisons and police."
The move prompted union outrage. Brian Strutton, national officer of the GMB, said: " This is just another unpleasant dig at public sector workers who have already been made scapegoats for problems they had nothing to do with."
Mr Osborne 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 that local councils would have to make "the kind of sacrifices central government is making".
He said the local government resource budget would be reduced by 10 per cent in 2015-16, but claimed that when changes affecting local government are taken into account including local income and other central government funding, local government spending would be reduced by around two per cent.
Sir Merrick Cockell, chairman of the Local Government Association, said the cut would "stretch essential services to breaking point in many areas".
Scotland, Wales and Northern Ireland do not escape the squeeze with all three required to find savings of 2%.
Mr Osborne also said that the Ministry of Defence would face further cuts to its civilian workforce as its budget was maintained in cash terms at £24 billion - representing a real terms cut.
But the equipment budget will rise by 1% per annum - as previously promised - and there will be no further reductions in military personnel.
The intelligence services - MI5, MI6 and GCHQ - emerged among the winners with a 3.4% increase in their annual budget.
But there will be cuts of 6% at the Home Office, 8% at the Foreign Office and 7% at the Department for Culture, Media and Sport - although funding for elite sports will be protected.
Winter fuel payments for expat pensioners who have retired to sunnier climes will be linked to a "temperature test" from autumn 2015, the Chancellor confirmed.
"People in hot countries will no longer get it. It is, after all, a payment for winter fuel," he said.
A "limit on the nation's credit card" will be brought in, he said, adding: "We will act to ensure that we will stop the cost of paying the Winter Fuel Payments made to those who live abroad rising in a way that no one ever intended.
"Paying out even more money to people from all nationalities who may have worked in this country years ago but no longer live here is not a fair use of the nation's cash."