Budget Aftermath: Pounds 3.5bn spending undershoot 'kept secret': Donald Macintyre reports on a skilful poker game played by Clarke and Portillo

TREASURY ministers only revealed to Cabinet colleagues in the final stages of the spending round that they intended to cut pounds 3.5bn from the agreed total for next year, it emerged yesterday.

The highly skilful poker game played by Kenneth Clarke, the Chancellor, and Michael Portillo, the Chief Secretary to the Treasury, during the round, helps to explain why, under severe pressure to make cuts, spending departments did not leak that the Treasury was intending to 'undershoot' the Cabinet agreed total of pounds 253.6bn for 1994-95.

The answer now appears to be that the departments - or at least those outside the Cabinet public spending committee, EDX - did not know. It remained the best kept secret in Whitehall. The implication is that at least in the early stages, departments like Environment and Defence - which had to take a hefty share of the cuts - thought that the Treasury was still fighting to keep spending within pounds 253.6bn.

According to some ministers, they might have been less willing to surrender if they had known that the final total was intended to be lower. One minister said: 'We may be a bit warier next time round.'

Mr Clarke played down the significance of the strategy yesterday, saying that 'the undershoot did emerge at a latter stage. Anybody who actually knows where you are getting to on some of the big departments can begin to see what your overall figure is.'

Mr Clarke said that the new system - in which EDX works together with the Treasury in ensuring that limits already agreed by Cabinet are adhered to - was 'working well'.

He added at a press conference: 'The old idea that the Chief Secretary went round a whole series of bilateral negotiations with individual colleagues, none of whom had really a very clear idea of what was happening to everyone else, became a kind of arm wrestling competition around Whitehall.'

He said that under the old system of bilateral bidding, 'the first permanent secretary I ever met said that he always judged his secretary of state by whether he brought home the groceries.

'There was a tendency for people to be winners and losers according to how much money they got out of it.'

He added: 'They can't work like that now because we don't have the bidding, there aren't a great number of bilaterals and there is a whole committee of Cabinet ministers who handle this. 'There are arts to the trade but I think the Treasury needs its black arts rather less that it used to because it does deliver an overall package.'

He said all minsisters had agreed, for example, that the NHS was a priority, laid down in the election manifesto.