George Osborne braces Whitehall for 40% cuts in Tory Government spending review

Government departments have been ordered to prepare for cuts of up to 40% as Chancellor George Osborne fired the first shot in the latest Whitehall spending review.

Mr Osborne warned ministers in unprotected departments would be expected to deliver "more for less" in the Government's drive to save £20 billion over the next four years.

Treasury Chief Secretary Greg Hands is writing to departments to set out plans to achieve savings of 25% and 40% by 2019-20 - in a repeat of what happened at the start of the last parliament in 2010.

Giving evidence to the Commons Treasury Committee, Mr Osborne acknowledged that ring-fencing spending on defence, schools, the NHS and international aid would mean deeper cuts elsewhere.

"It is right for a Government to make a judgment about its priorities. We have made those commitments," he said.

"That obviously increases pressures elsewhere in government. But government is ultimately about making these choices. I think we have made the right choices."

While he defended the Government's commitment to spending 0.7% of GDP on international aid, he signalled that ministers would be conducting a thorough review of how the money is used.

"We want to make sure that we are saving lives," he said.

A Treasury document setting out the scope of the spending review – which reports on November 25 – said that aid spending across government would be scrutinised to ensure it represented "high value for money".

Mr Osborne also made clear that he wants departments to draw up plans to sell off billions of pounds worth of land and other public sector assets.

The Treasury paper highlighted the fact that the Ministry of Defence (MoD) alone currently owns around 1% of all the land in the UK - some 227,300 hectares.

Altogether, despite £1.7 billion worth of disposals in the last parliament, the Government still owns more than £300 billion worth of land and buildings.

Further savings could come from selling off portions of the electromagnetic spectrum held by departments - most notably the MoD - to create additional mobile phone network capacity.

Mr Osborne said the savings - which follow the £12 billion in welfare cuts and £5 billion from tackling tax avoidance announced in the Budget - will complete the Conservatives' plan to eliminate the deficit in the public finances.

"We have shown with careful management of public money we can get more for less and give working people real control over the decisions that affect them and their communities," he told MPs at Treasury questions.

"The spending review will deliver better government and economic security."