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The Ministry of Defence has confirmed that it has reached an agreement with the Treasury on its future budget.
George Osborne says he has agreed a budget with the Defence Secretary Philip Hammond which will lead to a reduction in staff at the Ministry of Defence.
The government is understood to be keen to channel its resources into cyber defence which Mr Osborne described as "which is the new frontier in defence".
George Osborne has told the BBC's Andrew Marr programme that recent fines paid by some of Britain's biggest banking firms will be used to provide treatment and support to injured soldiers.
The Chancellor George Osborne has confirmed that there will be further job losses at the Ministry of Defence, after announcing that he had agreed the department's budget for the following year.
Speaking on the BBC's Andrew Marr programme, Mr Osborne said that the job cuts must fall within the department because the government would not "reduce the number of sailors, soldiers and airmen".
Shadow chancellor Ed Balls has urged Chancellor George Osborne to pump money into the economy now in order to reduce the need for cuts in two years' time.
Writing in the Sunday Mirror he said: "Instead of planning more cuts two years ahead, they should use this week's spending review to boost growth and living standards this year and next year.
"More growth now would bring in more tax revenues and mean our public services would not face such deep cuts in 2015."
He said the Government should boost lending to businesses with a new British Investment Bank and reintroduce the 10p income tax band.
Mr Balls added that ministers should "get construction workers back to work repairing Britain's broken roads and building the affordable homes we need".
Labour leader Ed Miliband has announced that he will not be able to reverse any of the Chancellor's cuts in day-to-day spending, as George Osborne prepares to attack the Opposition's austerity programme.
Osborne will tell MPs on Wednesday: "Three years ago Labour tried to scare the country about the pain to come if any Government actually to dared to cut spending and borrowing.
"But their predictions haven't come true. They said crime would soar if we saved money from police budgets - it's fallen. They said saving money in the Border Agency would stop us reducing immigration but immigration is down by a third.
"They said the private sector would never make up for jobs lost in the public sector but it has done three times over. They were wrong last time so don't believe the same old scare stories this time."
The Chancellor is expected to tell MPs on Wednesday that the UK economy is healing but also enforce a new round of cutbacks in the Whitehall budget.
Chancellor George Osborne will claim the British economy is "leaving intensive care" as he unveils his fresh round of spending cuts for Whitehall.
Mr Osborne will deliver his spending review on Wednesday, setting out £11.5 billion of cuts in Government departments in the year after the next general election.
Alongside the cuts the Chancellor will announce plans for an infrastructure plan to "power Britain back into the economic premier league", using savings to invest in roads, railways, education and science.
Final details of the spending review were still being worked out, with reports suggesting some ministries, including Vince Cable's Business Department, were yet to agree their settlements.
Latest ITV News reports
The Chancellor confirmed there will be further Ministry of Defence job losses under a budget deal that agreed with the Defence Secretary.