Whitehall Told To Find Billions In Savings

Government departments are being ordered to earmark a potential £16bn pounds of savings as fears grow over the eurozone crisis.

The Treasury is also stepping up scrutiny of spending in Whitehall as ministers underline their determination to hit deficit reduction targets.

Treasury Chief Secretary Danny Alexander will unveil the changes in a speech to influential think tank the Institute of Fiscal Studies.

Mr Alexander will say that the coalition's action to date has sheltered the UK from the "worst of the storm that continues to affect our eurozone neighbours".

But he will warn that reforms are needed to make sure the coalition's spending plans are not knocked off track by unforeseen costs.

"In an environment of economic uncertainty, with ongoing instability in the eurozone, the UK's large deficit remains a crucial economic vulnerability. It remains a clear and present danger to stability," he will say.

New rules, which will be enforced from this year on, have been drawn up by finance directors in Whitehall and are aimed at improving financial management.

Mr Alexander will say they are "rules that demonstrate the collective determination of government to ensure that never again will our nation's finances be allowed to get into such a mess".

He will insist that departments' delegated responsibility for spending cannot be "an excuse to hide information, close the books, or weaken financial management".

"For too long financial management in Government has been stifled by poor information sharing and poor incentives. That has to change," the Cabinet minister will say.

"From now on, all departments must monitor and share spending information with the Treasury on a monthly basis. And that data must be consistent."

The Treasury kept central reserves small in the spending review so departments could have the most money possible, which means departments themselves have to have a buffer in case of any problems.

Under the new rules, they will have to identify around 5% of their resource budget which could be used if new "pressures" emerge or new policies need funding.

Mr Alexander will stress that the changes are not a "small tweak to the Whitehall machine".

"They are another signal of our unwavering determination to deliver the fiscal consolidation we promised," he is to say.

"It is this focus on delivery that is the cornerstone of our country's credibility. Credibility, let us not forget, which is delivering the record low interest rates that are benefiting millions of families across the UK."