The Coalition's focus on making immediate cuts at the time of the last spending review in autumn 2010 risked undermining long-term economic objectives, an influential Commons committee has warned.

A report entitled ‘Managing Budgeting in Government' issued by the Public Accounts Committee today finds the Treasury's decision to slash capital spending from £60bn in 2009/10 to a planned £38bn by 2014/15 was mainly driven by existing spending and political commitments.

Exchequer officials chose to delay or scrap new capital projects because doing so was less troublesome than reducing Whitehall resource budgets, which often involve cuts to civil service wages and welfare expenditure, the report notes.

In giving evidence to the MPs, senior officials from the Treasury acknowledged that in hindsight they would not have approved such major cutbacks in capital spending, and that chancellor George Osborne's recent £6.3bn infrastructure boost represents a reversal of decisions made at the time of the 2010 spending review.

The MPs also criticised the Treasury for its failure to promote cross-government budgeting, lamenting the system still encourages departments to focus on their own interest and fails to provide incentives for planning across departmental boundaries.

Margaret Hodge, chair of the PAC, said: ‘Too often, departments concentrate on their own self-interest, protecting their turf rather than ensuring joined-up thinking across government.

‘There is no evidence of clear thinking on how one decision to save money in one budget area might lead to an increase in expenditure elsewhere.  For example, the higher rents proposed under the Affordable Homes Programme may well impact on the housing benefit bill,' Ms Hodge added.

Communities secretary, Eric Pickles echoed these sentiments when addressing the All Party Parliamentary Group on Local Government on Wednesday.

Mr Pickles disclosed his frustration at fellow Cabinet members for propping up Whitehall's ‘silo-based mentality' amid Coalition discussions in the run up to the Budget.

‘I've felt that local government was much better at working together than the different departments of Government,' Mr Pickles said.  ‘Sometimes, when we complain about the silo-mentality of local government, actually, we should take a good hard look at ourselves.'

As evidence, Mr Pickles cited his experience in establishing the Troubled Families Unit, where he said local government colleagues were far quicker than civil servants in detecting the duplication and pointless form-filling hampering efforts to turnaround the lives of chaotic households.