Chancellor George Osborne has come under pressure to inject life into the UK economy as he prepares to unveil the 2013 Budget on Wednesday.
Osborne has ordered most government departments to make a further 1.0% cut to budgets over the next two years to allow for savings of £2.5bn to fund extra capital spending.
He said departments can afford to slash budgets because they under-spent this year by more than the average.
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Total annual under-spends across departments have averaged around £6.0bn since 2007. The government expects the amount underspent for 2012/13 will be somewhat higher.
The Ministry of Defence will be able to use unspent money in the last Budget to make up for upcoming spending cuts.
Ring-fenced departments, including the NHS, international aid and schools, will be unaffected.
However, departments including environment, energy, transport and justice will have to find a way to make savings.
The cuts come on top of the 3.0% spending reductions announced for the next two years in last year's Autumn Statement.
Wednesday March 20th
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