Iain Duncan Smith reaches welfare budget agreement with Treasury

Work and Pensions Secretary Iain Duncan Smith has settled his bitter dispute with George Osborne over cuts to the welfare budget.

The Chancellor is set to announce that the Department for Work and Pensions is one of seven more government departments to have reached agreements with the Treasury ahead of next week's spending review.

Mr Duncan Smith had been engaged in a highly public battle with Mr Osborne, warning through friends that he was ready to resign if the Chancellor insisted on cuts which undermined his Universal Credit reforms.

The expected announcement by the Chancellor - in a speech on cyber security at GCHQ - will take the number of Whitehall departments to have settled with the Treasury to 11.

The others in the latest batch to have signed up are the Department of Energy and Climate Change, HM Revenue and Customs, the Cabinet Office, the Scotland Office and Office of the Advocate General, the Wales Office and the Northern Ireland Office.

That still leaves a number of big spending departments which have yet to reach agreements, including the Home Office where Theresa May is under intense pressure over expected cuts to police numbers.

The latest departments to settle will face average cuts in day-to-day spending of 21% over the spending review period - the equivalent of 6% a year - resulting in savings worth more than £2.5 billion by 2019-20.

Mr Osborne is expected to say that the savings will be achieved through a combination of further efficiency cuts - in HMRC's case through the digital transformation of the tax system - closing low-value programmes, and focusing on "our priorities as a country".