George Osborne tells ministers: You must deliver on cuts

Chancellor George Osborne is to issue a stark warning to Cabinet colleagues that they must deliver on promised spending cuts if they are to ensure Britain's future prosperity.

With just over two weeks until he unveils his spending review for the next five years, Mr Osborne will disclose that just three other departments had agreed settlements with the Treasury.

In what it is being billed as a major speech, he will warn ministers unless they agree to the cuts needed to bring down the deficit in the public finances "the deficit could bring our country down".

He will be backed by David Cameron who will use a speech to the CBI to say that the spending review is "all about putting the security of British families first".

Their comments appear to be squarely aimed at ministers like Work and Pensions Secretary Iain Duncan Smith who is reportedly locked in a bitter battle over cuts to the welfare budget.

Mr Duncan Smith is reported to be furious at plans by Mr Osborne to take £2 billion to soften the blow from the cuts to tax credits following the Government's defeat in the House of Lords.

Sources close to the Work and Pensions Secretary have briefed newspapers that he is ready to walk out of the Government if he is forced to compromise on his universal credit reforms.

The high stakes were underlined when Foreign Secretary Philip Hammond could only say "I don't think so" when asked in a BBC interview on Sunday whether he thought Mr Duncan Smith was about to quit.

The Chancellor will however deliver an uncompromising message, insisting that repairing the public finances must be the first priority.

"While debt is high, our economic security is in danger. No one knows what the next economic crisis to hit our world will be, or when it will come. But we know we haven't abolished boom and bust," he will say.

"We know we must prepare for whatever the world throws at us. We know that if we don't control spending, we run the risk of higher mortgage rates and higher taxes - and a loss of confidence in our economy.

"Let me put it another way: if our country doesn't bring the deficit down, the deficit could bring our country down. That's why, for the economic security of every family in Britain, the worst thing we could do now as a country is lose our nerve."

Mr Cameron will tell the CBI: "By making the further savings we need over the course of this parliament we can prioritise what matters for working families - schools, the NHS and our national security."

The ministers who have so far settled with the Treasury are Transport Secretary Patrick McLoughlin, Environment Secretary Liz Truss and Communities Secretary Greg Clark.

Under the terms of the agreements they will be expected to cut day-to-day spending by an average of 8% a year for the next four years through a combination of efficiency savings and closing low value programmes.

The Treasury has signed up to a similar agreement.