Unprotected budgets will face an extra 1.1% reduction in day-to-day spending for 2014/15 and 2015/16 under the plans set to be announced in George Osborne’s Autumn Statement.
Mr Osborne and Treasury Chief Secretary Danny Alexander have written to their Cabinet colleagues informing them that central departmental spending is being cut by more than £1 billion a year between now and 2015/16.
The Treasury said that “strong financial management” by departments this year meant there were likely to be significant underspends in their budgets, allowing the Treasury to release £1 billion of its annual £3 billion reserve.
But in order to “lock in” this lower level of spending, the 1.1% reductions will be made across departmental resource budgets over the next two years.
The budgets for health, schools, aid, local government, HMRC and the security services will be spared the further cuts.
The Government expects the exemption of the local government budget will help local authorities freeze council tax in 2014/15 and 2015/16.
The Ministry of Defence will be given “exceptional flexibility” to keep its expected underspends of £800 million and roll them over to next year.