Whitehall departments face big spending cuts over the next four years after the decision to claw back £18 billion a year to help to pay off public debt.

Capital spending will be halved from £44 billion next year to £22 billion in 2013-14, halting plans for infrastructure projects such as hospitals, motorways, waste plants and schools.

Departments are being asked to make better use of office space, allowing vacant property to be sold. An efficiency review published on Tuesday suggested that hospitals could work just as effectively using 18 per cent less space and government offices could use 30 per cent less space by sharing desks. Value-for-money programmes by the Treasury have looked at making greater use of hard shoulders to expand motorways instead of widening roads.

Public sector pay and jobs are also under threat because of lower growth in current spending than expected. The Red Book warns that public pay must be restrained and there are rumours that three-year deals may need to be reopened. Unison, the public sector union, rejected yesterday a 0.5 per cent increase from town hall employers after increases of 2.3 per cent for MPs and teachers.

Planned growth of 1.2 per cent in current spending between 2011-12 and 2013-14 has been squeezed to 0.7 per cent, saving £9 billion a year within four years. Revenue spending is expected to grow from £666 billion next year to £736 billion instead of £745 billion, according to the Institute for Fiscal Studies (IFS).

The IFS said that the changes would lead to cuts across most Whitehall departments. The £27 billion annual squeeze announced by Alistair Darling included £9 billion in raised taxes, £9 billion in reduced revenue spending and £9 billion in cuts in capital expenditure by 2013-14. “The spending outlook for departments will be very different from previous years, whoever wins the next election,” Carl Emmerson, deputy director of the IFS, said.

He added that the new spending totals suggested that almost all the £15 billion-a-year savings made through the operational efficiency programme would be clawed back by the Treasury. In previous efficiency exercises, Whitehall departments have been able to spend savings on services. The Treasury has indicated that spending departments will be expected to make further administrative savings of 3 per cent a year until 2013-14.

The Red Book gave details of where the axe would fall first. The Department of Health has been asked to contribute nearly half the Treasury's proposed £5 billion of public spending cuts in the next financial year and has had its budget reduced by £2.3billion to £104 billion. The NHS's share of that budget will decrease more steeply, down £2.6 billion from £104.6 billion as planned in last year's Budget, to £102 billion.

At least £1 billion a year is expected to come through efficient commissioning of local health services and reducing the length of hospital stays. Better deals on drugs will also be sought.

A further £100 million should be saved by joint purchasing and improved back-office functions, although doctors' leaders warned that money would have to be spent early to uphold the quality of care.

The Department for Schools has had to save £650 million through schools efficiencies, the Department for Transport £200 million, the Department for Skills £400 million, local government £600 million, the Ministry of Defence £450 million and the Treasury revenue departments nearly £800 million to help to secure the £5 billion cutbacks already earmarked for next year.

Dave Prentis, the general secretary of Unison, said: “Spending plans have been revised down and the Government's ambitions of reducing child poverty and building world-class public services look in doubt. It would be a mistake to make public services the whipping boys for private failures or the excesses of greedy bankers.”

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