George Osborne slashes Whitehall budgets to fund £5bn schools investment The Chancellor, George Osborne, has announced a £5 billion investment in schools and other projects, to be paid for by cuts to Whitehall budgets. Mr Osborne said the details of the fresh spending squeeze would be announced in Wednesday's Autumn Statement. Whitehall departments will be expected to cut day-to-day spending by 1% (£950 million) in 2013/14 and 2% (£2.5 billion) in 2014/15. It is thought that this will release £5bn to be spent on capital projects. Health, schools, international aid, HM Revenue and Customs and nuclear decommissioning will be protected from having to make the savings. The BBC has reported Treasury sources saying that £1bn will go towards building 100 new free schools and academies, creating 50,000 additional new school places. The decision to slash Whitehall budgets follows a spending assessment carried out by Danny Alexander, which made clear that many departments were over-achieving on planned savings. Across Whitehall, departments have underspent by a total of £3 billion over the last two years, the review found, and there is a belief that there is further scope for more savings. The cutbacks are thought to relate to day-to-day resource spending, rather than capital spending projects. The cuts will apply directly to England only, but there will be knock-on effects for Scotland, Wales and Northern Ireland under the complicated formula which determines central funding for the different parts of the United Kingdom. Local government will be exempted from the cuts in the first year, as it is already having to find savings to deliver a council tax freeze, but councils will be required to meet the 2% cut in 2014/15. Meanwhile, the Ministry of Defence will be given additional flexibility to roll over underspends - which last year amounted to almost £400 million - from one year to the next. As a result, ministers believe that there will be no reduction in military manpower and core MoD budgets. The cuts across Whitehall departments relate to day-to-day resource spending, rather than capital spending projects. The imposition of cuts means that the new spending comes within the Government's existing fiscal plans and involves no additional state borrowing. Under the new plans the government believes it will be able to make greater capital investment, as a proportion of GDP, than Labour did. David Cameron said the Government would cut "unnecessary spending" and put the money into infrastucture projects. Speaking on a visit to Corpus Christi School in Brixton, south London, the Prime Minister said: "Government departments aren't actually spending up to their budgets so I think we can say to them, you've got to cut back some spending, including some unnecessary spending, and let's put that money into things that will make a difference in our country and in our economy - more roads, more school buildings, more infrastructure to make our economy work better, to make our country work better."