Audio Transcript:

LISA MULLINS: I'm Lisa Mullins and this is The World. Britain is on an austerity plan. One day after outlining deep cuts in defense spending, the government laid out plans today for across-the-board cuts in public spending. Britain's trying to get its growing debt under control. And that means the pain will likely be felt throughout the country. The World's Laura Lynch reports from London.

LAURA LYNCH: Britain has one of the highest deficits among Western nations. Today, the country's top finance minister, George Osborne, said it's time to face up to reality.

GEORGE OSBORNE: Today is the day when Britain steps back from the brink.

LYNCH: Osborne stood in the House of Commons for over an hour, detailing a broad range of cuts. Among them, welfare benefits will drop sharply, the retirement age will rise four years earlier than planned, and almost half a million public sector jobs will disappear. The government will slash spending by about 130 billion dollars over four years. And Osborne is blaming it all on the previous government.

OSBORNE: This coalition government faced the worst economic inheritance in modern history. The debts we were left threatened every job and public service in the country. But we have put the national interest first. We made the tough choices.

LYNCH: Osborne's politically charged statement left little doubt that just about everyone will feel the effects, from the oldest facing retirement, to the very youngest. This daycare center in Exeter is free for parents seeking to find a way back to work. But with cuts to local government looming, parents here know it may soon shut down.

FEMALE SPEAKER: It's upsetting to think they would cut something like this. Obviously it benefits children. It's their education. It's their future. Yeah, I think it would be quite devastating and it annoys me.

FEMALE SPEAKER: Well, I'm probably quite controversial. I actually agree that they have to do something about it. I just feel it has to happen. You know obviously if it affects you personally it's difficult. I just feel that something has to happen and I think they're actually taking a very brave step.

LYNCH: But union activists like Mark Serwotka believe many still don't grasp what's about to hit them.

MARK SERWOTKA: When people digest cuts in university funding, seven billion pounds off welfare, we're going to see people socially-cleansed out of parts of the inner city, because they'll be forced to move house. When we see the budget cuts mean local services will be decimated. And when people also work out that if half a million public sector jobs go, it will probably be half a million in the private sector, that's a million people on the dole queue, I think there will be a real anger.

LYNCH: From the financial sector, there were cheers. Alastair Heath edits City am, a newspaper catering to those who work in London's business district. He's optimistic the cuts outlined today will spur private sector investment and the creation of new jobs.

ALASTAIR HEATH: I think on balance the city's quite happy about what's been announced today, they're quite happy about the fact that George Osborne hasn't backed down on the overall volume of spending cuts which he'd been promising and I think that's what people here were really looking for.

LYNCH: But some worry the deep cuts will slow the fragile recovery down and lead to a double-dip recession. Tony Travers of the London School of Economics says it's hard to tell what the impact will be.

TONY TRAVERS: Certainly the governments opponents in the UK talk about these being the biggest cuts since the 1920s, but we are much richer now and the state is vastly bigger so it's not that public spending in Britain is going to go back to the level of 1945 or the �20s. It will be going back to the level of the middle of the decade that's just ended. That makes it sound slightly less shocking. But there is a shock, because moving from fast growth to contraction is like changing a car's gear from fourth or fifth to reverse and that does feel very odd if you do it in one go.

LYNCH: Despite the fact that the government will increase spending on health care, schools, and foreign aid, despite the government's plan to impose a permanent tax on banks, protestors took to the streets in London tonight. Much smaller than marches in other parts of Europe, it still signals Britain is heading for a season of worry and discontent at what lies ahead. For The World, I'm Laura Lynch in London.