Vince Cable has called for public sector pay budgets to be frozen and some managerial posts to be axed in a bid to cut spending by £2.4bn a year, the Guardian reports.
At the Liberal Democrat's party conference today the Treasury spokesman is expected to say Britain's £158bn public sector pay bill - which amounts to 22% of government spending - should be frozen, stopping pay increases for top civil servants but still enabling a pay rise for the lowest salaried workers.
In a speech to the party in Bournemouth he will say: "We must stop civil service bonuses and the culture of massively inflated salaries. A freeze in the total pay bill is better than cuts in services."
Cable will say the salaries of lower-paid public sector workers could be protected, and even increased, by cutting the salaries of highly paid managers and by axing some managerial jobs.
The Liberal Democrat's proposal will only apply to the next round of pay deals, with current deals being honoured.
A freeze of the overall budget for public sector pay would lead in particular to savings in the NHS where 70% of the health budget goes towards paying staff.
In August the Conservatives announced they would freeze the pay of all local government workers if they were to win the next general election.