Treasury orders ministers to find £16bn more in cuts

Spending cuts are set to deepen by another £16bn as the Treasury orders Government departments to save 5 per cent of their budgets amid increasing pessimism about Britain's financial outlook.

Danny Alexander, the Chief Secretary to the Treasury, will warn of the serious need for still greater austerity measures today as he outlines a call for all departments to put aside more money.

"These new controls are not just a tweak to the Whitehall machine," Mr Alexander will say according to advance reports of a speech he is set to make to the Institute for Fiscal Studies today. "They are another signal of our unwavering determination to deliver the fiscal consolidation we promised. When we look at the mess Britain's finances were allowed to get into, we say: 'never again'."

Ministers will have to put aside 5 per cent of their budgets as reserves in case of unexpected demands on their spending, as the Treasury's national buffer fund of £4bn is being cut to £2.8bn.

In a sign that the Government is worried Whitehall will struggle to keep spending down, departments will also be required to share their figures with the Treasury on a monthly basis.