Government departments have been told to draw up plans for up to 6% spending cuts in a bid to save £3.5bn by 2020.
The Treasury said the government’s Efficiency Review – which will not apply to the NHS or core schools budgets – will help reinvest up to £1bn in prioirty areas.
It added that any savings found within local government would be used to fund social care services.
Chief secretary to the Treasury, David Gauke, said: ‘We are committed to a modern, high-quality public sector that delivers the services people need in the most efficient way possible.
‘There has been considerable progress, but there is further to go and the whole of government is working together to consider how we can live within our means while delivering maximum value for every pound of taxpayers money.’
Government departments will now draw up proposals for contributions by modelling scenarios of 3% and 6% savings.
However, labour accused the Government of ‘sneaking’ out the announcement. Shadow chancellor, John McDonnell, said: ‘Sneaking out an announcement asking departments to model cuts of 3% and 6% for 2019/20 is no way to manage public spending.
‘Hammond urgently needs to explain why this announcement was made in the way it was and why after seven years of failed austerity he thinks more of the same will now work.’