Brown calls in auditors to scrutinise spending

Gordon Brown is to call in independent spending watchdogs to help the Treasury maintain pressure on Whitehall departments to deliver Labour's pledges to improve public services.

The Chancellor is to give the National Audit Office and the Audit Commission a formal role in the "progress chasing" by the Treasury to check whether departments are on course to meet their 160 performance targets.

Although the Treasury will continue to set the public service agreements, the outside watchdogs will play an important role in assessing how to measure the progress made by departments.

The move comes as Mr Brown prepares to cut several billion pounds from the bids submitted by cabinet colleagues ahead of a wholesale review of public spending to be completed by July.

The Chancellor is to warn several ministers they must trim the proposed three-year spending plans they submitted last month so that he can pump extra money into the NHS. He is squaring up for a battle with ministers including Geoff Hoon, the Defence Secretary, David Blunkett, the Home Secretary, Estelle Morris, the Education Secretary, and Stephen Byers, the Transport Secretary.

Mr Brown is said to be "less than impressed" with the performance of some departments against their main targets. He is sceptical about the demands by the Ministry of Defence for extra money to meet the new threat of international terrorism after the 11 September attacks, pointing out that the MoD underspent its budget by £700m last year.

Another clash is looming over education, with Ms Morris determined not to be "left behind" by the extra money to be channelled into the health budget, possibly from higher taxes.

Mr Brown will tell cabinet ministers they should produce proposals to save money in some areas in order to increase their budgets in others. "It is not a one-way street," said one source. But Treasury officials insist that a failure to make progress towards targets will not necessarily mean cash bids being vetoed because it could be the result of underfunding.

The system of targets has been criticised by some ministers, who claim it gives the Treasury too much power to interfere in the running of their departments. There are fears that targets due to be achieved from this year may be missed, adding to the perception that the Government has failed to turn round public services.

Mr Brown's move to bring in outsiders will be seen as a response to critics who say the current system is too secretive. His decision will be announced in the next two months when the Treasury responds to a report last year by Lord Sharman, which recommended more independent scrutiny.

¿ At a meeting of European Union finance ministers today, Mr Brown will urge other members to increase their help for developing countries. He will call for the EU to concentrate its £3.4bn-a-year aid budget on the poorest nations.