Schools, hospitals and police budgets will be protected until 2013 – but almost every other area of public spending will be vulnerable in the ruthless hunt for savings.
With a general election expected in five months' time, Alistair Darling, the Chancellor, refused to spell out in full where the axe will fall. But it was clear that no Whitehall department – with the exception of International Development – would be safe from the squeeze.
Mr Darling confirmed overall public spending would rise by 2.2 per cent in 2010-11, providing "continuing strong support for the wider economy until the recovery is firmly established".
The average increase would then fall to 0.8 per cent a year between 2011-12 and 2014-15, which is likely to amount to a drop in real terms after inflation is taken into account.
Treasury officials would not be drawn on which areas of Whitehall spending would be hardest hit. But those departments without ring-fenced budgets are certain to suffer large cuts. According to the Conservatives, these could amount to a 10 per cent reduction.
Mr Darling acknowledged there would be "cuts to some budgets, as programmes come to an end or resources are switched to new priorities". He added: "Some programmes will need to be stopped altogether."
He identified savings of £5bn to come into effect by 2012-13, but these are likely to be a fraction of what the Government must save if it is to reduce the national debt mountain.
His carefully worded announcement means even departments that are apparent "winners" will still be under pressure to deliver savings.
NHS front-line spending, which accounts for 95 per cent of Andy Burnham's budget as Health Secretary, will rise in line with inflation in 2011-12 and 2012-13, and will be £3.7bn a year higher in three years' time.
But the Department of Health was told to make cuts worth £10bn-a-year by 2102-13. Savings will be made in the purchase of patient services, boosting productivity levels and reducing back-office costs.
Spending on schools attended by three- to 16-year-olds will go up by 0.7 per cent in real terms in 2011-12 and 2012-13, while budgets on education for 16- to 19-year-olds will increase by 0.9 per cent above inflation. Spending on Sure Start children's centres will be pegged to inflation. The total estimated increase in education spending will be £2.6bn a year by 2013.
However, Ed Balls's department has already been warned that its budget for new schools and repairing buildings will drop from £7.4bn to £6.7bn next year, with further reductions likely. Yesterday it was told to identify £350m in savings from central budgets and efficiency measures.
Mr Darling said "sufficient funding" will be available to maintain current numbers of police officers.
He announced an extra £2.5bn to fund the campaign against the Taliban in Afghanistan. But the Ministry of Defence could still suffer some of the heaviest cuts over the next two years. Its civilian workforce will be cut from 86,000 to 81,000 by 2011; its overall budget is projected to drop from £47.9bn to £45.5bn over the next year.
Other budgets that may be squeezed include the Foreign Office; Communities and Local Government; Transport; and Culture, Media and Sport.
Mr Darling's commitment to £5bn in cuts by 2012-13 includes a £600m reduction in university and science research budgets. Wendy Piatt, director general of the Russell Group of universities, voiced her alarm over the "potentially severe cuts" and warned they could affect universities' international competitiveness.
Another £1.4bn will be saved by scrapping job creation schemes set up as the recession began to bite. Regeneration and housing budgets will be squeezed by £340m; spending on IT projects – notably the centralised NHS database – cut by £500m; and savings of £250m found in residential care costs.
Mr Darling announced a cut of £360m in the criminal justice system, through streamlining the preparation of prosecutions, reforming legal aid and asking private companies to run more prisons.Reuse content