The Whitehall review being conducted by Sir Peter Gershon is set to call for over 80,000 job cuts.

In a draft of his report, seen by the FT newspaper, Sir Peter says that £10 billion to £15 billion a year extra could be spent on hospitals and schools if his recommendations are pursued.

He also presses the case for greater productivity in schools, policing and health.

And he says there should be a 16 per cent reduction on the running costs of central government - with 80,000 civil service posts cut as jobs are redeployed elsewhere.

Unions have said the scale of the proposed reduction is "unacceptable".

In his report Sir Peter also makes the case for a dramatic reduction in red tape, moves towards compulsory online transactions between state and citizen, changes in working practices and smarter procurement by government.