The Chancellor will issue a stark warning about the extremists adding potentially deadly online assaults on vital services to their arsenal and promise £1.9 billion a year by 2020.
French president Francois Hollande has pledged to “destroy” IS after it claimed responsibility for Friday’s murders of 129 people in bars, restaurants, a concert hall and a stadium across the capital city.
As an international manhunt went on for one surviving terrorist, 26-year-old Salah Abdeslam, security was being stepped up at key events and locations in the UK.
Armed officers will be deployed at Wembley Stadium where the French football team is playing England in a friendly - with the Duke of Cambridge among those due to be in the crowd in a show of solidarity.
London mayor Boris Johnson will also be in the crowd and England fans are being encouraged to join in the singing of the French national anthem before kick-off.
Prime Minister David Cameron called on the country to show the same resolve it displayed against Hitler during the Blitz in the face of the growing terrorist threat.
And he took a swipe at Labour leader Jeremy Corbyn, who questioned the legality of the killing of the IS extremist nicknamed Jihadi John, saying he was “not happy” with the idea of a shoot-to-kill policy against terrorists on British streets and reiterating his opposition to the UK joining air strikes in Syria.
“You do not protect people by sitting around and wishing for another world. You have to act in this one. And that means being prepared to use military force where necessary,” the PM said.
Mr Osborne is to give details of the cyber crime investment during a visit to the GCHQ listening station in Cheltenham - including a new National Cyber Centre to bring together the country’s leading experts.
He is expected to disclose which Whitehall departments have now agreed budget cut deals with the Treasury ahead of next week’s Autumn Statement - but say it is right to increase security spending.
IS had already proved its ability to exploit the internet “for hideous propaganda purposes; for radicalisation, for operational planning too”, he will say - but should not be expected to stop there.
“They have not been able to use it to kill people yet by attacking our infrastructure through cyber attack.
“They do not yet have that capability. But we know they want it, and are doing their best to build it.
“So when we talk about tackling Isil, that means tackling their cyber threat as well as the threat of their guns, bombs and knives.
“We see from this place every day the malign scope of our adversaries’ goals, their warped sophistication and their frenetic activity. The stakes could hardly be higher.
“If our electricity supply, or our air traffic control, or our hospitals were successfully attacked online, the impact could be measured not just in terms of economic damage but of lives lost.”
Mr Cameron announced yesterday that another 1,900 intelligence agents were to be recruited across MI5, MI6 and GCHQ in the light of the threat of IS - also referred to as Isis or Isil.
“As a nation determined to live within our means, we are facing painful choices, and the hardest of decisions. You will see that next week,” Mr Osborne will say.
“But the Prime Minister, my colleagues at the top of government and I have decided that we have to make a top priority of cyber security, if Britain is to be able to defend itself, now and in the future.
“It is a bold, comprehensive programme that will give Britain the next generation of cyber security, and make Britain one of the safest places to do business on line.”
Other elements are an Institute For Coding, increased capabilities for the National Cyber Crime Unit, efforts to recruit and train promising youngsters and a Cyber Innovation Centre in Cheltenham to house cyber start-ups in their early months.
Mr Osborne will give details of a £20 million competition based around digital and computer skills to attract joint collaborations between universities and businesses, training.
While England’s international friendly will go ahead, the Belgian Football Association announced it had cancelled Belgium’s match with Spain today over security fears.
“At the very end of the evening the Belgian FA was contacted by the government, who made the recommendation not to play tomorrow’s match. This is because the terror alert level is high and with the current leakage of a suspicious person,” a spokesman said on Monday night.