George Osborne's spending review cuts to hit social care and police

George Osborne will announce big cuts in spending for the police, social care, local government, further education, renewable energy and welfare as he is forced to finally spell out how he plans to have reduced spending in key government departments cumulatively by nearly 50% since the Conservatives came to power in 2010.

After weeks of media focus on protected Whitehall departments, the chancellor will detail how the cuts will fall across the rest of government departments.

The shadow chancellor, John McDonnell, said Osborne had no more excuses left after five years. Stealing Osborne’s security theme, he added: “The cuts are putting people’s livelihoods at risk.”

The Tory election manifesto commitments to protect the NHS, pensions, foreign aid, education and defence have put intense strain on the remaining unprotected budgets in Whitehall. Such is the reconfiguration of the state that nearly 43% of all public spending will be focused on health and pensioners by 2020, up from a third in 1997-98.

The highest profile victim is likely to be social care despite a pledge to allow councils to raise an extra £2bn in council tax earmarked for social care by the end of the parliament, but councils in the north of England with a lower council tax base have warned that the extra cash is not even a sticking plaster.

Police chiefs are also preparing to lambast the home secretary, Theresa May, for not doing more to protect their budgets, weeks after a new police funding formula collapsed due to Whitehall miscalculations.

In what is a full reversal of Labour’s decade-long expansion of the British state, Osborne will insist the public finances must be in overall surplus by the end of the parliament, taking the political gamble that there has been no change in public attitudes to the deficit and austerity across the UK.

Speaking to the BBC’s Today programme on Wednesday morning, Paul Johnson, director of the Institute for Fiscal Studies thinktank, said the chancellor’s target of bringing the budget back into surplus by 2019 was a tough one.

“The problem with this target is – very much unlike the targets he set himself over the last parliament – it is fixed and inflexible, so if it turns out that the economy does even a little bit worse than he’s expecting over the next few years, I think it will be close to impossible to meet, unless he’s going to put some tax increases in place,” he said.

“If the economy pans out as he currently expects, tax revenues come in as he expects, it might be just about reachable, but only at the cost of really big cuts in things like the Home Office, local government and other departments.”

The bulk of the political focus will be trained on how Osborne, blocked by a twin revolt in the House of Lords and on his own backbenches, recalibrates his plan to slash £4.4bn from the tax credits bill next April. He is expected to fund the anticipated slowdown in the cuts through alternative welfare reductions, including to housing benefit, which will hit a similar but different tranche of the working poor.

The chancellor will try to steer the public’s gaze towards his plans to boost affordable housingby promising to deliver “the biggest affordable housebuilding programme since the 1970s – with over 400,000 new homes built across England”.

Promising to double the housing budget, Osborne is expected to admit there is a home ownership crisis in the UK, saying: “In the end,spending reviews like this come down to choices about what your priorities are. And I am clear: in this spending review, we choose housing. Above all, we choose homes that people can buy.”

In his newest proposal, Osborne will set out plans for 135,000 help-to-buy shared ownership homes, allowing people to buy a share in their home and then buy more shares over time as and when they can afford it.

The scheme is modelled on ideas first prepared by the work and pensions secretary, Iain Duncan Smith, seen as a development of right to buy in council homes and potentially a means of cutting the £25bn housing benefit bill.

Treasury sources said the government would provide £4bn to help housing associations, local authorities or the private sector to deliver these schemes by 2020-21.

The Treasury said “help-to-buy: shared ownership” would be available to a much wider group of people than current shared ownership products.

All households earning less than £80,000 outside London or £90,000 in the capital will be eligible. The current constraints on people being able to buy will be removed, including restrictions on the number of bedrooms and the requirement to be nominated by a local authority.

Councils will be disappointed by what they will regard as another constraint on social housing coming so soon after right to buy – which allows council tenants to buy their homes at a substantial discount to the market price – was extended to 1.3 million people in housing association homes.

It is is expected that, if the tenant moves, they could sell their share in the property either back to the council or to a private buyer. Duncan Smith has proposed that when the occupant dies he or she could hand the home to his or her children.

Osborne will also press ahead with plans trailed in the Conservative manifesto for 200,000 new starter homes to help first-time buyers under the age of 40 purchase a home at a 20% discount. The Treasury will directly fund developers to build starter homes and fund the regeneration of brownfield land for their construction.

The government will provide £2.3bn of support for starter homes, which will have a maximum value of £250,000 outside London and £450,000 within. Buyers will receive a 20% discount when they purchase the property and will keep the full benefit if they own the property for five years.

In addition, the government will provide £200m to deliver 10,000 new homes available at a lower-than-market rent, to be sold after five years, with the tenant getting the first right to purchase their home at that time. The funding will be used to offer an average rental discount of 20% of the market value.

In advance of the spending review, Osborne has focused on extra cash for protected departments, but knows he will be unable to escape the attention falling on cuts. He will be hoping the media will rapidly shift attention to the case for Syrian airstrikes due to be made by David Cameron in the Commons on Thursday.

Interviewed by the Guardian, McDonnell said the government’s long-term economic plan was in chaos.

“Everything Osborne is doing is to dig himself out of a hole. Osborne has been there five years. He has no one else to blame. There are no more excuses. He is putting his leadership ambitions ahead of economic judgment and we are all paying for it in terms of cuts and the deficit he is creating for the future.

“We support the increased spending on the security services but security begins on the streets, with the police on the beat. The government says it is offering security, but in reality it is increasing risk.

“The cuts are putting people’s livelihoods at risk. The lack of investment is putting the long-term future of the economy at risk. The economy is in chaos because of political decisions. The cuts are hurting people badly across every service area, from health to policing. The public’s health and security won’t be safe. The failure to invest puts the future at risk.”