Whitehall could lose up to 100,000 jobs during the next parliament, as part of government targets to wipe £10bn from the civil service's budget by 2020.
The £10bn target represents a third of the total needed to be cut from government spending, if the Conservatives are to eliminate the budget deficit by the end of the next parliament.
The appointment of Osborne's former chief of staff Matthew Hancock as cabinet office minster is regarded as playing a key role in this ambition. It is seen as a step forward in smoothing over relations between the two departments.
Hancock's predecessor Francis Maude made cuts of £15bn from Whitehall's budget; however tensions are thought to have become strained by Maude's interventions in Treasury matters. According to one government source quoted by the Financial Times relations were “terrible”.
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During Maude's tenure, more than 90,000 jobs were cut at Whitehall, reducing the civil service to its smallest size since World War Two.
However unions including public servants' union the FDA believe there will be equal or greater job losses in the next five years.
The FDA last week called on the government to offer a new deal for civil servants, arguing that it is "more than simply another mechanism to reduce the deficit".
General secretary Dave Penman said: "If the civil service is being tasked with delivering 21st century public services with pre-war resources, then the government needs to demonstrate that valuing civil servants, ensuring that they have the rights skills, paying them fairly, matching commitments to resources and genuinely engaging with them are the critical elements of the new deal that needs to be struck with civil servants."