Chancellor George Osborne will reveal next week where the axe will fall on £6 billion of spending this year.

An emergency Budget will be held on June 22 - six weeks on from the formation of the Con-Lib coalition Government - but more details of the first swathe of savings aimed at cutting the £163 billion will be published on Monday.

Ministers have been ordered to review every new spending decision made by Labour this year in a bid to identify ways to slash more from the Whitehall bill. Mr Osborne said the immediate cutbacks are backed by the Bank of England and the Treasury and failing to act quickly would be "disastrous" for the economy.

A new watchdog, which will take over the job of making economic forecasts, has begun work on an independent audit of the public books to inform next month's Budget.

Bob Crow, general secretary of the RMT union, said: "The Tories have always been the party of mass unemployment because that suits their class and keeps the workers under the cosh. This is fiscal fascism in all its Thatcherite glory and, even worse, it is being propped up by the Lib Dems."

Liberal Democrat Treasury Chief Secretary David Laws said: "What's changed our minds is not only the compromises you have to make if you are working in a coalition, but also the clear advice we have received from the Bank of England and the Treasury itself that it would be responsible and safe to make these adjustments without risking the economic recovery which is under way."