Chancellor George Osborne still needs to tackle £8bn black hole after treasury agrees 10% spending cuts with seven Government departments

George Osborne has yet to reach agreement on cuts to the budgets of the Government’s biggest spending departments – with an £8 billion black hole in the Government’s plans still remaining.

The Chancellor announced this morning that seven Government departments have provisionally agreed to reduce their budgets by up to 10 per cent as part of Treasury plans to cut 2015/16 spending by £11.5 billion.

But these departments only account for around 20 per cent of the cuts Mr Osborne needs to make with the big spending departments like the Home Office, Defence and Business yet to reach agreement with the Treasury. Schools, health and international development spending will be ring-fenced in the review.

Mr Osborne insisted that he would get agreement with the other departments in the next month before he announces his Comprehensive Spending Review in June.

He said the savings would ensure money is available for the NHS and infrastructure projects in line with public demand.

“Seven Government departments have agreed provisionally to cuts of up to 10 per cent,” he said.

“This will enable us to get this deficit down and also, crucially, spend money where I think the public want it spent, which is on things like the NHS and infrastructure which helps create jobs.”

Mr Osborne said justice, energy and communities and local government were among the departments to agree to the changes.

He confirmed he was “still in negotiation and discussion” with Mr Hammond and Home Secretary Theresa May over cuts he has demanded from them.

But he told BBC1's Breakfast programme: “Everyone who sits round the Cabinet table shares the same goal, which is to bring the deficit down, to fix our broken economy, to make sure money is going to job-supporting infrastructure projects.

“They've all got to make savings, they are all aware that they've got to make savings. What we want to do is make sure these savings do not affect the frontline services.”

Previous cuts to the Home Office budget had not led to the predicted increase in crime, but to a fall in recorded offences, he pointed out.

Asked whether money for counter-terrorism should be part of the review following the attack in Woolwich, Mr Osborne said: “This was an event which shocked and revolted the whole country. Before, we were able to protect the counter-terrorism budget, so we are absolutely clear about what the nation's priorities are.

“We've been able to protect it in the past and I'm not going to do anything which is going to endanger the security of this country at home or abroad or the fight against terrorism, but that doesn't mean that you can't take a vast institution like the Home Office and look for savings.”

Asked whether further cuts could be expected in the welfare budget, Mr Osborne pointed to savings that have already been announced, such as the £26,000 cap on the total benefits claimed by a household.

He said: “There's big savings on welfare but I would say that is not an excuse to let Whitehall off the hook.

“We've also got to make savings there so we can fix our economy, bring that deficit down and spend on the things that people want us to spend on, like the NHS, like the infrastructure that's going to create jobs in the future.

“I'm focused now on trying to get money out of individual Government departments by making further savings.”

“We are now about 20 per cent of the way there with a month to go,” said Mr Osborne.

“I don't think any Chancellor in history has made this much progress with a month to go.”

Mr Osborne defended the decision to protect health, schools and overseas aid from cuts.

“This is about choices of the kind of country we want to live in and where we spend our money, particularly when money is tight,” he said.

“That's a tough choice and I've made a tough decision that I'm going to protect spending on the NHS - that's the thing I suspect people probably care most about - and I'm also going to try to protect money going into schools so we educate our children for the future.

“On foreign aid, this country made a commitment to the rest of the world, to the world's poorest, that we were going to spend money to help them have better lives and secure them from diseases.

“It is not a vast part of the Government's budget. I think sometimes that the debate about foreign aid is vastly greater than the actual sums of money involved.

“The big sums of money go on things like the NHS and our school system and that's where of course we are making tough decisions to protect those budgets by cutting the budgets of other Government departments.”

Treasury Chief Secretary Danny Alexander wrote to each department setting out "planning assumptions" ahead of the Comprehensive Spending Review, which is due before the end of June.

In March the influential Westminster watchdog, the House of Commons Public Accounts Committee, said a short-termist approach and a lack of joined-up thinking across government had marred Mr Osborne's austerity programme of public spending cuts.

With an aim to find £200 billion in cuts over four years in the 2010 Spending Review, the Treasury took the axe to those budgets that were easiest to cut, even though they might undermine the Government's stated priority of encouraging growth, the committee found.