Osborne has taken the axe to every government department and started his “bonfire of the quangos” in a bid to slash waste.
The £6.2bn of cuts is just the start of the government’s bid to reduce the nation’s £156bn budget deficit.
Deeper cuts are expected in the Chancellor’s first budget on June 22 and the public spending review later in the year.
The first round concentrates on saving cash by freezing civil service recruitment and slashing budgets spent on day-to-day operations by departments.
Osborne said that £1.7bn of contracts with current suppliers to the government would be stopped or delayed to allow rates to be negotiated down.
But some of the savings will be reinvested with £170m going towards 4,000 social homes, £50m towards further education college capital spending and £150m on kick-starting apprenticeship programmes.
Contractors were braced for this first round of cuts but the real pain for the industry will be felt in the budget and spending review.
One contractor told the Enquirer: “This first round is all about cutting waste at Whitehall but we don’t want to lose all the development quangos because some of them do a real job.
“This is the government getting its own house in order before it starts the really painful stuff.
“The housing and education cash is an unexpected bonus but we’ll have to see if that really is new money and how it fits with cuts later in the year.”
The main areas highlighted for cuts are:
• £1.15bn in “discretionary” areas such as consultancy and travel costs
• £95m through savings in IT spending
• £1.7bn will be saved in delaying or stopping government contracts and projects
• Reductions in property costs will save £170m
• More than £120m expected to be found through a freeze in civil service recruitment
• £600m by cutting the cost of quangos
• £520m will be saved through other low-value spending
The savings expected on a department-by-department basis are:
Dept business: £836m
Dept Transport: £683m
Education dept: £670m
Dept work pensions: £535m
Chancellor’s Dept: £451m
Local govt: £405m
Home Office: £367m
Mins of Justice: £325m
Devolved admins: £704m
Dept for Energy: £85m
Culture dept: £88m
Cabinet Office: £79m
Foreign Office: £55m
Law officers’ dept: £18m