George Osborne will today take the first steps towards the heaviest cuts in public spending in modern British political history.

The Chancellor is to set out the timetable for a spending review which is expected to result in tens of billions of pounds being slashed from Whitehall budgets in the autumn.

The extent of the financial squeeze will be underlined by David Cameron, in a warning of "painful times" ahead. But the Prime Minister will insist that the Government cannot duck difficult decisions over reducing the £156 billion ($339 billion) budget deficit.

Osborne and his Liberal Democrat deputy, Danny Alexander, the Chief Secretary to the Treasury, will promise the review will lead to a "revolution" in public services - and insist frontline services will not be affected.

But the coalition Government's words will be seen as a barely coded warning the state will have to withdraw from areas regarded as non-essential - with big job losses likely.

Treasury ministers are drawing inspiration from Canada, whose government tackled its huge national deficit by slashing federal budgets by 20 per cent over four years.

One idea they are considering is the establishment of a "star chamber" in which ministers would scrutinise their colleagues' proposals for cutting budgets and running public services more cost-effectively.

The Government is also preparing to bring in Lord Browne of Madingley, the former chief executive of BP, to oversee ministers' efforts to find savings. He is expected to lead a team of senior business figures who will sit on the boards of Whitehall departments.

Government sources have dismissed suggestions that ministers were considering freezing benefits and cutting child tax credits.

They insisted the administration had shown its determination to make tough decisions by already setting out plans to trim public spending by £6 billion in the current financial year.

The Budget on June 22 is also expected to foreshadow some spending cuts and include some tax-raising measures.

In a speech, Cameron will say: "The decisions we make will affect every single person in our country, and the effects of those decisions will stay with us for years, perhaps decades, to come."

In an interview with the Sunday Times, Cameron refused to be drawn on speculation that value added tax would be increased in the Budget.

But he hinted that plans for an increase in capital gains tax could be diluted by introducing a taper system geared to hit hardest people who benefit from instant cash windfalls, rather than long-term investors.

- INDEPENDENT