Spending cuts to send 'shockwave' through Whitehall

Immediate public spending cuts of £6.25 billion are designed to send a "shockwave" through Whitehall, the Government has announced.

The Chancellor, standing alongside his Lib Dem deputy at the Treasury, David Laws, said the reductions would be made while maintaining ''frontline'' services in key areas such as the NHS. He also announced that schools spending would be protected.

Mr Laws is to chair an "efficiency and reform group" including with Cabinet Office Minister Francis Maude to help push through the savings quickly and hold bodies to account.

"It will provide a central unit in the Government that can negotiate on behalf of all Government departments to renegotiate contracts to give our Government as much clout as possible to go out there to the private sector and negotiate savings," he said.

"But it is also imposing, with the agreement of the Treasury, some quite draconian controls over the next year on expenditure on consultancy, on advertising on IT, which will require approval down to a very low level of spending.

"There were some people who said 'Is this too draconian, are we being too inflexible?'. Actually, my view is that, unless we send out this sort of shockwave through Government departments to say 'You can't spend on all these areas', that they are not actually priorities, we won't get the step change in behaviour we expect.

"So we are being very draconian and very inflexible, deliberately, over the next year to drive out these types of costs."

The group will look at areas such as IT spending - with a freeze on £1 million-plus projects, procurement, advertising and marketing - with only "essential" items allowed, Civil Service expenses - such as cars and first-class travel - and recruitment and property.

There will also be an "immediate review to create a more simplified approach to Civil Service pay structures and terms and conditions", the Cabinet Office said.

Mr Osborne said teh scale of savings identified meant that school spending could be added to health, defence and international development budgets which have already been promised protection from new cuts.

Mr Osborne said the savings would include:

:: More than £1 billion of "discretionary" spending such as consultancy and travel;

:: Nearly £2 billion from IT programmes, suppliers and property;

:: Over £700 million from "restraining recruitment" and cutting quangos.

:: More than £500 million from cutting "low-value spending".

The savings were based on "strong economic advice" from the Bank of England and the Treasury in favour of "early action to deal with our debt", the Chancellor said.