Rachel Reeves has scrapped some winter fuel payments, along with a raft of other government programmes and policies to plug a projected government overspend of £22bn.
The chancellor said those not in receipt of pension credit will not longer receive the extra money as she repeatedly told MPs: "If we cannot afford it, we cannot do it."
The chancellor also announced that all department would be expected to find savings worth an estimated £3bn.
Ms Reeves said the decision to scrap winter fuel payments for some pensioners was a "difficult" one she did not want to make.
"Those not in receipt of pension credit or certain other means tested benefits will no longer received the winter fuel payment from this year onward," she told MPs.
"The government will continue to provide winter fuel payments worth £200 to households receiving pension credit, or £300 to those receiving them with someone over the age of 80.
"It is the responsible thing to do to fix the foundations of our economy and bring back economic stability."
Ms Reeves' statement came after the news that junior doctors had been offered a 22.3% pay rise by the government to end strike action.
Follow the latest updates from Westminster here
Keep up with all the latest news from the UK and around the world by following Sky News
Tap hereOver the past few days, ministers have sought to suggest the economy they inherited from the Conservatives is worse than expected, despite the Institute for Fiscal Studies thinktank warning about the bad state of public finances during the election campaign.
Ahead of Ms Reeves's speech, cabinet minister Pat McFadden told Sky News: "What we have discovered since taking office a few weeks ago is things were even worse than we thought and the previous government was certainly guilty of running away from the situation."
He gave the example of the Rwanda scheme, previously estimated to cost £400m.
"We have now found that it is £700m, with billions more to be spent in future," Mr McFadden said of the now cancelled scheme.
He also suggested the IFS and other analysts would "have to today like everybody else acknowledge that the budgetary pressures this year are higher than those set out in the OBR [Office for Budget Responsibility] forecast before the March budget".
But shadow transport secretary Helen Whately said Ms Reeves "would have known about the state of the public finances" while serving in opposition because of the OBR.
The Tory MP said: "Actually, while Labour is going out there and trying to tell everybody that it is all so difficult for them, this is just them setting a narrative for tax rises that they want to bring in later on."
This breaking news story is being updated and more details will be published shortly.
Please refresh the page for the fullest version.
You can receive breaking news alerts on a smartphone or tablet via the Sky News app. You can also follow @SkyNews on X or subscribe to our YouTube channel to keep up with the latest news.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
