Britain’s most senior civil servant has warned of sweeping cuts in some public services to maintain spending on key government programmes such as those dealing with care for the elderly, obesity and climate change.

In an interview with The Times, Sir Gus O’Donnell, the Cabinet Secretary, suggested that some departments would suffer more than others in the looming spending squeeze.

Asked whether he agreed with a policy adopted in Canada, where spending was cut by 20 per cent and some departments had much deeper cuts than others, he said: “You could envisage a situation where you go for deeper dives on this, most certainly.”

In a highly unusual move, Sir Gus said that he had also held separate discussions with Alistair Darling, the Chancellor, about a revolution in the way that money is allocated across Whitehall. It would mean that issues spanning several departments would for the first time get their own budgets. They would include specific issues such as global warming, obesity and Alzheimer’s disease.

Cabinet secretaries rarely wade into highly charged political debates about spending and Sir Gus hardly ever gives on-the-record interviews. His intervention coincides with comments by Lord Mandelson, the Business Secretary, that Britain faces a decade of public spending “constraints” to “rebalance” its finances. It also follows growing signs that there is likely to be a slimmed-down spending round this autumn, contrary to earlier suggestions. Sir Gus warned that spending would need to be lower than “we have seen in the past decade” and indicated that there would be no extra for government priorities such as climate change and obesity. “We won’t break the bank. It’s not new money.” Instead, many traditional departments could have their budgets sliced by the Treasury to pool cash for key programmes. Under his proposal, ministers would be allocated budgets for an issue such as care for the elderly or climate change and would be responsible for ensuring that results were delivered across Government.

The plan is likely to be resisted by many ministers and civil servants, anxious to protect their empires. But Sir Gus insisted that many issues crossing departments were not being tackled effectively. “I have talked to the Chancellor about this.” Asked if it was under active consideration, he said: “Yes.”

Sir Gus suggested that lessons could be learnt from the Canadian Government, which cut its spending by 20 per cent over four years to lift the country out of its 1990s recession. Several Canadian politicians have held seminars in London recently, attended mainly by Shadow Cabinet ministers and officials. “There are some lessons for us . . . it was certainly an interesting model,” the Cabinet Secretary said.

Sir Gus, former press secretary to John Major and likely to stay in his post should David Cameron win the election, said the plan for single-issue budgets would have to be part of the next spending round. “However you do machinery of government there will be cross-boundary issues. Some, such as ageing, will not be sorted within the health department alone.” He said that he had suggested allocating budgets across departments. “Climate change is a classic example. Another is obesity.”

Departments would still have core programmes, but in areas where it was difficult to get ministerial collaboration you would have an extra central pot of money as an incentive. Yesterday Sir Gus also outlined Civil Service reforms. In future permanent secretaries will be held to account over innovation, collaboration with other ministries and the delivery of results.

The new performance tests, which could be linked to pay, are intended to ensure that ideas from the front line are considered and tested with Whitehall backing.

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