Tony Blair, who is backing the Treasury's move, believes that much of the extra spending by previous Labour governments disappeared into a "black hole" and did not deliver better services.
Stephen Byers, the Chief Secretary to the Treasury, has written to each Whitehall department, asking for urgent proposals on how they will spend the budgets announced in July, which included an extra pounds 20bn for education and pounds 19bn for health over the next three years.
Mr Byers will negotiate new "public service agreements" with cabinet colleagues over the next few weeks. He has decided to publish the new contracts to increase the pressure on ministers to channel the extra cash into the Government's priority areas.
Last night Mr Byers said the performance targets would be "challenging but realistic". But he could meet resistance because some ministers are unhappy the agreements will give Gordon Brown, the Chancellor, unprecedented power to interfere in the running of individual departments.
In his first keynote speech since joining the Cabinet in July, Mr Byers will today spell out the Treasury's hopes of bringing about a cultural revolution in Whitehall spending.
"We must get away from the failed and misguided approach of simply thinking that by throwing money at a problem, we will somehow make it disappear," Mr Byers will tell a London conference organised by the New Statesman magazine. "Instead, there needs to be a clear link between additional funding and the delivery of an improved service."
Mr Byers will tell ministers during the negotiations that their top priority should be to improve services constantly each year, rather than to spend more.
The targets, to be published in November, will restate some of the Government's existing pledges, such as cutting the number of schoolchildren playing truant by a third and boosting levels of literacy and numeracy.
But the Treasury blueprint will also add new promises to be met by the year 2002. They will include reducing sharply the number of emergency hospital admissions among the over-75s by providing better care in their own homes. All three-year-olds in Scotland will be guaranteed nursery places, while in Wales ministers will aim to halve the number of under- 65s who die from heart disease.
The Treasury will assure ministers their departments will not face cash penalties if they fail to hit the new targets. `They will be judged by the public if they do not deliver," said one source.
However, the Treasury is bound to take account of ministers' performance during future spending rounds and when they bid for budget top-ups from the Government's reserve kitty.
Some ministers fear that Mr Brown will use the more centralised system to enhance his already strong Treasury powerbase. "He wants fingers in every departmental pie," one said. "We are all signed up to the Government's priorities but we have got to have some room for manoeuvre in how we spend our budgets."Reuse content