The coalition is pushing ahead with efforts to slash the deficit today after George Osborne appealed for the public to help identify where cuts can be made.
The Government's working group to eradicate waste will meet for the first time, with ministers determined to realise quick savings.
Last night the Chancellor said reducing spending by billions of pounds was a "national challenge" as he outlined the Government's approach to the looming Comprehensive Spending Review.
A series of consultations will be held so the "brightest and best" from society, business and charities can provide ideas on reshaping provision of services to reduce costs.
Ministers will also be forced to justify every item of departmental expenditure before a "Star Chamber" of senior colleagues, while welfare and pensions bills are to be re-examined.
The announcements were condemned by opponents as a political "Axe Factor" and lacking in substance.
But the coalition received support from a surprising quarter when Labour's former City minister insisted there was "considerable waste" that could be cut.
In an extraordinary attack, Lord Myners also told peers he had been frustrated by his ex-colleagues' "flawed thinking" on the economy, and said there was "nothing progressive" about running up huge public debt.
Setting out his plans in the Commons, Mr Osborne said: "We are going to have a more collegiate approach.
"We are genuinely seeking to engage as many people as possible, the brightest civil servants across all the Government departments, the best people from the devolved administrations, the best people from pressure groups, independent think-tanks and the frontline public services."
The Chancellor said the UK needed to learn from Canada's experience tackling a massive budget deficit in the 1990s.
"They asked probing questions about every part of Government spending. They engaged the public in the choices that had to be made and they took the whole country with them," he said.
"That is what we will seek to do. We are committed to carrying out Britain's unavoidable deficit reduction plan in a way that strengthens and unites this country."
He added: "This is the great national challenge of our generation. After years of waste and debt and irresponsibility, we've got to get Britain to live within its means. It's time to rethink how Government spends our money."
But shadow chancellor Alistair Darling said there did not "seem to be very much substance" in the Government's approach.
And he rejected Mr Osborne's attempt to blame the previous administration for the country's financial woes, saying unemployment was half that of the 1980s and repossessions were half those of the 1990s recession.
"The reason our economy is growing and the reason our borrowing is coming down is because we, in common with other countries as part of an international consensus, were prepared to take action to save our economy going into recession - and every single one of those measures was opposed by him when he was shadow chancellor," Mr Darling said.
SDLP MP Mark Durkan accused the Government of taking an "Axe Factor approach to government".
Cabinet Office minister Francis Maude will chair the first meeting of the efficiency and reform group today.
The joint Treasury-Cabinet Office body has been tasked with ensuring that waste is eliminated and savings realised quickly.