The Observer reveals officials have drawn up a secret map splitting England into regional pay zones. Four zones will have different levels of pay for civil servants, with those in the North-East, South coast, Wales, large parts of the Midlands and the South-West earning the least. The map was drawn up by the Cabinet Office's Reward, Efficiency and Reform Group with help from the Hay Group, the newspaper reports.

An increase in the uptake of green vehicles will hit Treasury coffers, the Institute for Fiscal Studies has warned. The IFS predicts that higher uptake in green vehicles will hit duty revenues, leaving the Treasury with a £13bn shortfall by the end of next decade.

More than 120,000 public sector workers and police have taken part in a day of protests over pensions and pay.

Ministers were locked in a war of words with unions bosses and police representatives today as NHS workers, civil servants and police officers marched in London.

There was some dispute over the numbers taking part, with unions predicting up to 400,000 public sector workers would join the 24 hour strike, but Cabinet Office minister Francis Maude saying the actual number taking part was around 100,000.

"This is dramatically lower than union claims", he said. "Nevertheless it is very disappointing that a handful of unions insist on carrying on with futile strike action."

With thousands of off-duty police officers taking part in a rally in London in protest at Government cuts, Home Office minister Nick Herbert refused to back down in the face of police demands on spending cuts. 

He said: "It's very important that tough decisions are taken to deal with the deficit, and the police service and police officers I'm afraid can't be exempted from that."

Downing Street also insisted the police should accept spending cuts. The Prime Minister's Official Spokesman said: "We are having to make spending cuts across the board.

"We think the reductions in spending on the police are challenging but manageable and that the police will still have the resources they need to do the important work that they do."

But Paul McKeever, Chairman of the Police Federation hit back: "With those sort of cuts, you are going to be getting more anti-social behaviour, more crime and more disorder, and it’s inevitable, you can see it coming now, there is a perfect storm brewing here. The Government has to listen."

Earlier today, Gail Cartmail, assistant general secretary of Unite, told BBC Radio 4's Today programme her union will be talking to others about "widening the remit" for further action.

"Not only are our members having to pay more from their pay packet to contribute for a pension for which they get less, and have to work longer, they're also now entering into a third year of pay freeze with a fourth year planned," she said.

Mr Maude said: "The dedicated majority of public sector workers are working normally today and rigorous contingency plans are ensuring that nearly all key public services remain open as usual.

"We can now confirm that far fewer civil servants are on strike than in November – with around 100,000 taking part – down from 146,000 last year."

A package of measures to help vulnerable children and working parents was unveiled in the Queen's speech.

Help for disabled children and those with special educational needs was pledged, along with new laws to give parents more flexible leave. Also announced were reforms to the family justice system to speed up care proceedings and changes to the adoption system.

Her Majesty said the Government will “strive to improve the lives of children and families”.

Outlining a Children and Families Bill, she said: "My Government will propose measures to improve provision for disabled children and children with special educational needs. New arrangements will be proposed to support children involved in family law cases, reform court processes for children in care and strengthen the role of the Children’s Commissioner.

"Measures will be proposed to make parental leave more flexible so both parents may share parenting responsibilities and balance work and family commitments."

David Cameron this afternoon insisted the Government’s economic programme was one of “efficiency” not austerity, as he and Nick Clegg reaffirmed their commitment to reducing the deficit.

The pair insisted the country's economy was in a far worse state "than anyone thought" when they formed the Coalition and pledged to do "whatever it takes" to get it back on track.

In a joint appearance in Essex, the Prime Minister and his deputy reaffirmed deficit reduction as the Government’s “guiding task”, as they marked the two-year anniversary of the Coalition.

Labour has hit back with 'The Tory-led Government: A programme for no change', a blow-by-blow account of how the Government has "failed to live up to its own rhetoric".

Transport Secretary Justine Greening said the Conservatives and Liberal Democrats were "reaffirming our commitment to work as two parties for the sake of our country".

The two leaders also promised to listen and take stock after coming under increasing pressure from their backbenchers following heavy losses in last week’s local elections.

This afternoon, John Redwood said the media was taking an 'alternative Queen's Speech' developed by the ConservativeHome website too seriously, and insisted that the ideas he had submitted would fit in with Coalition priorities.

The Times also reports that that senior Liberal Democrats believe the party needs to withdraw from the Coalition if it is to avoid devastating electoral losses in 2015.

The rumours contribute to building tensions within the Coalition, following Simon Hughes' remarks yesterday that some Conservatives thought they were "born to rule".

Ed Balls has admitted he has not “fully costed” all of his pledges for the economy.

On the Sunday Politics this afternoon, the Shadow Chancellor was repeatedly asked how much his five-point plan for growth would cost and Mr Balls said:

“I've not costed the whole programme because it would depend on how much infrastructure we could bring forward but George Osborne’s plan means more spending, less tax, more borrowing. Over three or four years, we would get borrowing down faster than George Osborne because our plan would work – that’s what America’s proved, that’s what Britain would do.”

A "radical" rethink of the Government's Private Finance Initiative has been called for by the Commons Public Accounts Committee. The Committee, chaired by Margaret Hodge, warned that, in too many cases, investors have made "eye-wateringly high" profits while taxpayers are trapped in expensive and inflexible contracts.

Managers at a private equity fund investing in developing countries are to buy the Government’s 40% stake in the company for an advanced payment of $13m (£8m). Andrew Mitchell, the international development secretary, was keen to make cash from the sale of Actis, even though the company has generated little profit in the past few years, the Financial Times reports.

There have been 101 new civil service jobs with higher salaries than the Prime Minister created since the Coalition came to power. The Treasury has approved salaries over £142,500 at a total cost of £14m despite the Government promising to crack down on on civil service pay. It is thought most of the positions have been created in the NHS as the health service reforms are implemented.