Government departments may lose quarter of budgets

The Institute for Fiscal Studies (IFS) says defence, transport, housing and universities could all face deep cuts if Chancellor Alistair Darling's Budget calculations are to add up.

Yesterday Mr Darling defended his decision to leave the main decisions on public spending until the autumn, once the General Election is out of the way.

But the Tories described the Budget as "empty nonsense" while the Liberal Democrats questioned whether the limited cuts announced would actually be delivered.

In its post-Budget analysis, the IFS said departmental spending would have to be cut by 25bn over the next two years, rising to 46bn by 2014-15. Carl Emmerson of the IFS said the cuts – amounting to a 6.6 per cent real- terms reduction in departmental spending in the first two years – would reverse Labour's spending increases over the past decade.

The decision to protect frontline spending on schools and health for the first two years – along with maintaining the overseas aid budget – meant the axe would fall disproportionately on other departments, he said. In the two years to 2012-13, those departments whose budgets were not protected would face a 14.1 per cent reduction in spending, he said.

If the ring-fencing of schools and health spending was to end after 2012-13, he said, departments across Whitehall would see their budgets cut by 19.5 per cent by 2014-15.

However, if schools and health continued to be protected, the cuts for other departments would amount to a 25.4 per cent real-terms reduction over the four-year period.

Tory leader David Cameron said the Budget had failed to set out a clear plan to cut the deficit, now put at 167bn.

There was nothing to get this country growing again," he said. "They are neither dealing with the debt – which is a big, black cloud over this economy – nor are they taking action to get the economy moving."