Most Government departments have been told to prepare for cuts to their budgets of around 10%, it has emerged.
Schools, the NHS and international aid will continue to remain protected but most other funding is expected to be slashed in 2015/16, Government sources confirmed.
The Ministry of Defence, which Philip Hammond warned earlier this year would struggle to take any more cuts, is likely to get a 1% real terms increase in its equipment budget and a 5%reduction on the rest.
Treasury Chief Secretary Danny Alexander has written to each department setting out "planning assumptions" ahead of the Comprehensive Spending Review, which is due before the end of June.
To meet the £11.5 billion savings target most departments have been warned to expect a 10% funding reduction.
That gives the Treasury some wriggle room for finalising cuts that are likely to amount to around 8-9% once negotiations have been finalised.
School funding will remain protected but the rest of the Department for Education's budget faces a 10% cut.
The Government is committed to spending 0.7% of national income on aid, which will be met, but the rest of the Department for International Development's budget - mainly for administration - will be subject to cuts.
A Treasury spokesman said: "The Chief Secretary has today written to departments to set their planning assumptions for the 2015/16 spending round. Setting planning assumptions is a normal part of the spending round process. These are planning assumptions that allow flexibility, not final decisions."
The spending review comes against a backdrop of unrest among some sections of the Cabinet - dubbed the "National Union of Ministers" - who are resistant to further big cuts to their departments. Lib Dem Business Secretary Vince Cable and Tories Home Secretary Theresa May and Communities Secretary Eric Pickles are all believed to have made their concerns known.