FEW announcements have been awaited with such foreboding. A drumroll of leaks and horror stories over the summer created a grim build-up to George Osborne's second big day as chancellor of the exchequer: the moment when he would reveal where the spending cuts set out in his June budget would be made. Perhaps unsurprisingly, the actual occasion on October 20th was somewhat less dramatic than billed—the House of Commons was quite muted as MPs listened to the chancellor's statement—yet it will still prove crucial for the futures of both the coalition government and the country.

Mr Osborne stuck to his guns about the overall scale and pace of fiscal retrenchment in the four years to 2014-15, the final year of this parliament. He insisted that this harsh medicine was vital to cut Britain's bloated budget deficit, expected to be 10% of GDP this year. True, the chancellor added some £2 billion ($3.2 billion) a year to capital budgets. But no one can seriously suggest he has gone soft by aiming for total cuts of £81 billion rather than the previously announced £83 billion by 2014-15.

The government has already taken a first small step towards that saving by stripping £5 billion out of this year's spending. These were the early cuts criticised during the general-election campaign by Labour and, then, the Liberal Democrats, now the Conservatives' coalition partners. But those savings were tokenistic compared with the much bigger reductions that must be imposed in the next four years. Mr Osborne's task was to show how the government will make them.

In one sense, that job looks less forbidding than the sound and fury suggests. In cash terms, total spending will be 6% higher in 2014-15 than this year. But that does not take inflation into account: in real terms it will be 3% lower. Moreover, some spending is beyond the chancellor's control: debt interest is rising from £43 billion this year to £63 billion by 2014-15 as a result of the surge in government borrowing.

Mr Osborne had two main places to look for savings. The first was the welfare budget, which makes up nearly 30% of all spending. Second, the departments responsible for the public services, which make up around 55% of the total. The more he could find in welfare, the less the squeeze would be for the public services.

In June the chancellor announced £11 billion of welfare savings (by 2014-15), making it clear that he wanted to find more. In the event he came up with an extra £7 billion. These will come mainly from making working-age benefits for poorer households stingier. The Treasury has left untouched the nearly £4 billion spent annually on perks for people over 60 regardless of their income, who receive winter-fuel payments and free bus travel. But the single biggest cut will come from the controversial removal of child benefit from families with a higher-rate taxpayer from 2013. The chancellor now reckons this will save £2.5 billion a year, a lot more than the figure of £1 billion (which looked strangely low) that he gave at the Tory party conference on October 4th.

He was also able to find another £3.5 billion of savings outside the departmental budgets. Half of this will come from raising the contribution rates of employees into public-sector pension schemes, as Lord Hutton, a former Labour minister, recently recommended. The Treasury reckons that this will save £1.8 billion by 2014-15. In a move that has infuriated retailers it will raise another £1 billion by keeping (rather than recycling) revenues raised by a scheme to reduce carbon emissions through greater energy efficiency.

By making these additional savings, Mr Osborne was able to soften the blow on departmental budgets—but they are still taking a big hit. The cash devoted to the public services—the “departmental expenditure limits”—will have to drop by 11% in real terms by 2014-15 (see chart above).

That pain will fall unevenly. The smallish international-development budget will carry on rising sharply, because of the pledge to spend 0.7% of national income on overseas aid from 2013. More important, the commitment to ring-fence the huge NHS budget (second only to the welfare bill) from real reductions has meant a much bigger squeeze for other departments (see chart right).

Some of those have got off more lightly than others. After a ferocious battle, defence will be cut by 7.5%. The education department (which does not cover university funding) will be cut by 11%, mainly through a hefty reduction in its capital spending; its current expenditure will fall in real terms by only 3.4%. Mr Osborne made much of the fact that the schools budget for 5-16-year-olds, including a new “pupil premium” for disadvantaged children worth £2.5 billion by 2014-15, would rise in real terms—by 0.1% a year.

On the other hand the Home Office, responsible for policing, and the Ministry of Justice, in charge of prisons, each suffer a 25% cut by the end of the parliament. The environment department gets an even bigger cut of 30%. Most notable of all, the Department for Communities and Local Government will have its budget sliced by two-thirds. Grants to local authorities themselves will fall by 27%.

Tragedy or happy ending?

Despite the suspense ahead of the review, and the bitter struggles involved in setting these budgets, it constituted only the first act of the cuts drama. Whether or not that turns into a tragedy depends upon much else besides dry spending totals. The coalition says the Labour government got less than it should have done for the money it poured into the public services. The hope now is that tight budgets will galvanise genuine improvements in efficiency that make the cuts less painful.

One obvious way to reduce costs is to keep pay down. The government has already announced a two-year pay freeze for public-sector staff. State employers could carry on in this spirit after that, pointing out that the more pay can be kept down, the fewer the job losses. But job losses there will be, amounting to probably about half a million (out of a workforce of some 6m) by the end of the parliament.

The government is right that too little was achieved in the way of real reform of the public services under Labour. Its new remedy of dispensing with top-down targets and delegating control may unleash innovation in the way that services are provided, although some in local authorities will no doubt grumble that the sudden enthusiasm for greater local autonomy coincides with slashed budgets. The worry is that the result will instead be tackier public services and a meaner welfare state.