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The shock announcement affecting the West Midlands in the government’s Comprehensive Spending Review was that the Midland Metro tram route is to be extended from Birmingham Snow Hill station to New Street Station.

The plan, which many in the local business community believe will cause a huge amount of disruption for little gain, was thought to be dead in the water after transport secretary Philip Hammond announced he was suspending the scheme in June. But Chancellor George Osborne announced today that it, together with the redevelopment of New Street station, will proceed as part of a £30bn, four-year investment programme in transport projects.

Osborne's speech began with the revelation that the UK is currently paying £43bn each year in debt interest alone. Despite this, he confirmed that total government expenditure – capital and current – would rise to £702bn next year and £740bn in 2014/15.

This will be balanced by major efficiency savings expected from most departments. He confirmed that 490,000 public sector jobs will be lost in the next four years, which he said was "unavoidable when the country has run out of money".

However, Osborne also said the private sector has created 178,000 jobs in the last three months, reiterating his belief that stimulating growth will protect the UK against lost public sector jobs.

The average cut to departmental budgets was set at 19 per cent, lower than both the 25 per cent the government predicted in March and the 20 per cent proposed by the replaced Labour government.

The Department for Business, Innovation and Skills is facing a 7.1 per cent cut in its budget, well below this average. Osborne promised to "prioritise those areas of public spending most likely to create growth".

The Regional Growth Fund will be held at £1bn over two years, which was widely expected, but there will also be an additional third year funding of almost £0.5bn. Osborne also announced that the science budget would be protected at £4.6bn a year.

A 50 per cent increase in apprenticeships spending was also unveiled, which the Chancellor claimed will create an additional 75,000 new placed by 2014/15.

Other areas where major expenditure was promised to stimulate growth was the green investment bank, a £1bn initiative created by the previous government, which Osborne said will continue.

Offshore wind projects and port development will benefit from £200m investment, while £30bn will be invested in the UK's transport infrastructure.

The voluntary and charity sectors, which had been bracing themselves to take up the slack if social care projects fell under the axe, were promised a £100m one-year transition fund.

James Watkins, executive director of lobbying group Business Voice WM, said: "Business will need to be imaginative and innovative if it is to fight the supply chain problems that the spending cuts could herald."