William Waldegrave, the Chief Secretary to the Treasury, angered unions by targeting Whitehall staff for cuts in his review of public expenditure in the run-up to the Budget.
Whitehall insiders said his decision to target the Civil Service was an admission of failure of his previous attempts, as the minister responsible for the Civil Service, to reform Whitehall.
The deputy Prime Minister, Michael Heseltine, was said to be behind the renewed attempt to reduce the size of the Whitehall machine. "Heseltine has made it clear he is keen on subjecting the Civil Service to private sector discipline. He is on the warpath over it," said one insider.
Mr Waldegrave, who introduced a White Paper on Civil Service reforms last year, said: "One of the things I make no secret of is that there are further big savings to be found in the actual administration of Whitehall." He said the savings would be made in the short-term and did not deny on BBC radio that it would mean jobs would have to go. Asked whether it would send a shiver through the Civil Service, Mr Waldegrave said: "They recognise they have to have some of the same pressures on them as the private sector."
He said the public sector could not enjoy privileges that the private sector was denied. "We already have the smallest Civil Service since the war but we have to continue that pressure. I know there is much more that can be done," he said.
His remarks came as the Cabinet EDX committee on public expenditure, chaired by Kenneth Clarke, the Chancellor, held its second meeting in two days to thrash out the spending priorities.
Gillian Shephard, Secretary of State for Education and Employment, is battling with Mr Waldegrave over her bid for more money for next year, stressing that the Tories cannot afford to face another year of teaching redundancies.
The Secretary of State for Health, Stephen Dorrell, is also demanding an extra pounds 300m to fulfil the Tory election pledge of real-term increases in spending on the NHS.
Capital projects, particularly the road programme, are facing savage cuts.
The difficulties in cutting spending elsewhere have led Mr Waldegrave to turn to the Civil Service.
Launching the White Paper last year, Mr Waldegrave said he intended to cut the Civil Service from 530,000 to below 500,000. Last year it dropped by more than 24,000 to 516,000 but critics said that the Civil Service system had remained unscathed. Senior civil servants resisted his attempts to introduce performance-related pay.
A Cabinet Office source last night said the Government had claimed to have reduced the Civil Service by one-third, but many of the cuts were being carried out by the same numbers of people, who were employed by contractors.Reuse content