Britain's spending on its military mission in Afghanistan will be £2.4bn less than expected over the next few years as combat operations come to a conclusion in 2014.
Emphasising that the Government would continue to meet the "full cost of operations" from its reserve fund, George Osborne said the change in position was nonetheless expected to produce savings. He added he wanted to pass on "some of the benefits of the lower cost" to the Armed Forces.
He announced £100m worth of improvements to accommodation for the Armed Services, double the family welfare budget and double the rate of council tax relief.
This, he said, would result in those serving overseas not paying any council tax.