Benefits and public sector pensions have been formally earmarked for potential cuts for the first time, the chancellor has revealed.
George Osborne has said these areas will now be “comprehensively examined” as he singled them out for special attention in the forthcoming spending review.
The Treasury set out the framework for a review of all government spending, stating it would “comprehensively examine areas such as social security, tax credits and public service pensions”.
Plans for “savings and reform in these areas” will be published later this year.
It is the first time the welfare system has been targeted for cuts. Freezing all benefit payments would save more than £4bn a year, the Daily Telegraph has reported.
But any moves to cut public sector pensions would be controversial with unions and could meet resistance.
The government has also been briefed on separate research showing that every government department, other than health and international development, would have to cut spending by between 15% and 20% annually.
The news follows an announcement by Fitch, one of the world’s biggest credit rating agencies, that the government must cut spending by £86bn over the next five years – at least £15bn more than previously forecast.