George Osborne is studying proposals to scrap two large defence procurement projects as he begins to draw up an incoming Conservative administration’s hitlist of public spending.

The Shadow Chancellor and Liam Fox, the Shadow Defence Secretary, are in discussions over whether to include the A400M transport aircraft and the Future Strategic Tanker Aircraft (FTSA) programmes in a cuts package with potential savings of up to £3 billion, The Times has learnt.

The £2.7 billion A400M is dogged by technical problems and is more than a year behind schedule. Abandoning the programme would endanger thousands of British jobs. But Mr Osborne is considering choosing cheaper existing aircraft instead of both the A400M and the FTSA as he searches for cuts to the defence project to be implemented under a Tory government.

The details are the first to emerge from a new spending review being carried out by the Shadow Treasury team. “We are considering the future of government programmes and procurement plans that look like a luxury we simply cannot afford,” Mr Osborne told representatives at the Conservative spring forum in Cheltenham yesterday.

“The public finances are out of control and that presents a clear and present danger to the prosperity of an entire generation. We will take the measures necessary to restore order and sanity to our public finances.”

Until earlier this year the Tories were committed to matching Labour’s spending plans for defence together with those for education. Now both areas are being asked to share the pain of future spending cuts after the Budget revealed the scale of the crisis in the public finances.

Senior Tories acknowledge the party will come under increasing pressure to spell out how it would make good its promise to bring down public spending. A senior strategist said that David Cameron was determined to change the terms of debate about public spending and to avoid allowing Labour to rerun previous campaigns on the theme of “Tory cuts”.

Mr Osborne promised yesterday that he would spell out “specifics” at the next election. “We will need a democratic mandate for the changes we need to bring about,” he said.

“We will take the measures necessary to restore order and sanity to our public finances.

“That will mean very difficult decisions that won’t be popular with every lobby group and every vested interest. Yes, we will make efficiency savings, and there are billions to be had. But we don’t pretend that they will be enough.”

His decision to promise real-term increases in only health and international development aid leaves all other shadow ministers under a requirement to contribute to the public service hitlist.

Chris Grayling, the Shadow Home Secretary, is understood to be looking at existing policy areas. The party’s oft-repeated pledge to scrap the ID card scheme might yield just a one-off saving of £1 billion because it is so far advanced.

One senior figure said that the internal spending reviews threatened to cause “chaos”. “We no longer know what we can promise to match and what we can’t. It’s leading to quite a lot of panic.”

There is nervousness among Shadow ministers, also, at the scale of the cuts some are now urging the Tories to consider. The Reform think-tank outlined last week a £30 billion programme for next year including the scrapping of universal child benefit, a 10 per cent cut in health staff pay and charging commercial rates of interest on student loans.

Other politically difficult decisions could include scaling back the SureStart programme, the free-for-all childcare service, which has an annual budget of £1.3 billion. Another possible cut would be to abandon the promise to match Labour’s pledge to halve child poverty. The party’s pledge to scrap the ContactPoint database of 11 million children’s details would yield a saving of about £44 million a year in running costs.

In defence, additional procurements likely to come under examination include the Eurofighter, the FRES armoured vehicle as well as the two aircraft carriers. Although not currently under discussion, one shadow minister said he expected the Trident nuclear deterrent could eventually be included in a package of possible cuts.

In an apparent attempt to reassure his colleagues, Mr Osborne stressed greater Cabinet involvement in future spending rounds.

“I want my colleagues in Cabinet to be collectively responsible for the spending decisions we take,” he said.

“They won’t be the representatives of their departments in the Cabinet, they will be the representatives of the Cabinet in their departments.

“Together, collectively, collegiately we will get our country to live within its means.”

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