David Cameron and other senior ministers are to get a dedicated aircraft to take them on official visits around the world.
Government sources have said one of the RAF's air-to-air refuelling planes is to be converted to a ministerial transport for use on long-haul trips at a cost of up to £10 million.
Ministers will argue that the use of the A330 Voyager will save hundreds of thousands of pounds a year in charter costs hiring airliners from commercial carriers.
But the move is likely to prove highly controversial as Chancellor George Osborne prepares to unveil further deep cuts in next week's spending review.
It will draw inevitable comparisons with Tony Blair's plans for a prime ministerial jet - dubbed Blair Force One - which was ultimately blocked by Gordon Brown.
The plan will be formally set out in the Government's Strategic Defence and Security Review on Monday.
Government sources estimate that the change will save the taxpayer £775,000 a year in charter charges.
Currently Downing Street spends £6,7000 per flying hour on the Prime Minister's travel, but that is expected to come down to £2,000 under the new arrangements.
In one trip alone, No 10 had to pay £100,000 to hire an aircraft at short notice to take Mr Cameron and members of the Royal Family to the funeral of King Abdullah of Saudi Arabia.
A government spokesman said: "As part of the Government's defence review, we have been looking at ways to make better use of the RAF fleet to transport senior ministers and consequently deliver savings for taxpayers.
"We have decided to adapt one of our existing Voyager aircraft so that, in addition to its primary air tanking role, it can transport ministers and it will also be available for the Royal Family to use."
"In terms of reducing the travelling costs we are looking at moving away from long-distance chartering," one source said.