Chancellor George Osborne today told MPs the coalition had cut the deficit by a third since 2010, but confirmed Whitehall departments will now have to make deeper £11.5bn budget savings by 2015.

In his Budget statement, the chancellor confirmed most departmental expenditure limits (DELs) – Whitehall resource budgets – would decrease by 1% although existing protections would apply to the schools and health budgets.

‘Local government and police allocations for 2013-14 have already been set out and will not be affected,' Mr Osborne stated.

Mr Osborne announced government departments would underspend their cash allocation by more than £11bn this year and said the ‘traditional splurge of cash' by departments before the end of the financial year has to be curtailed.

Additional Whitehall savings would allow an extra £3bn to be pumped into infrastructure schemes for five years from 2015/16 until 2020.  ‘That's £15 billion of extra capital spending over the next decade,' Mr Osborne said.

According to the chancellor, the spending envelope for 2015/16 - to be detailed in the spending review on 26 June - will be £745bn.  This means total managed expenditure (TME) would be only £1bn higher than forecast in last year's Budget.

But the chancellor also pledged to fix a new limit on ‘a significant proportion' of Annual Managed Expenditure - spending which includes welfare and tax credits.