Gordon Brown announced the search for budget cuts after Treasury figures showed the government may need to borrow up to £10 billion more than was planned for in the last budget.

Brown’s comments came during the launch of a Whitehall efficiency review to be led by Peter Gershon, head of the government’s main procurement advisory agency, the Office of Government Commerce.

The review is set to include procurement spending, as well as the paying of state benefits, issuing of licences and tax collection.

One of the departments to be closely inspected will be the Department of Trade and Industry.

A DTI initiative this month promised British manufacturers more direct access to government purchasers ahead of tender invitations. It wants to ensure that small and medium-sized UK firms are better able to compete for the £1.9 billion government procurement budget.

British industry wants the government to take a more pro-British stance when selecting suppliers.

But the government, under European Union competition rules, cannot openly favour British companies.