THE GOVERNMENT has started preparing people for an age of austerity, announcing £6bn of immediate spending reductions, paving the way for much tougher cuts further down the line.

Details of where the axe will fall began to emerge last night, with Vince Cable's Department for Business, Innovation and Skills (BIS) expected to bear the brunt, shouldering up to £900m of reductions this financial year.

Treasury aides said a bonfire of quangos, semi-independent government agencies, would save around £500m, with the Qualifications and Curriculum Development Agency and the Skills Funding Agency earmarked for the chop.

Regional Development Agencies in the South East, which get their funding from the BIS budget, are expected to be wound down while those in the North will see their grants slashed.

The universities budget will also be reduced by several hundred million pounds, in line with plans prepared by Cable’s predecessor Lord Mandelson.

However, Cabinet Office sources insisted that a £750m strategic investment fund would be spared and denied suggestions that Cable was irked at having to scrap more projects than his colleagues.

“Vince’s department has a £21bn budget – one of the larger budgets that isn’t being protected – but these cuts are not disproportionate to the rest of government,” one said.

Elsewhere, the government is hoping to save cash by scrapping the ID cards scheme, scaling back new recruitment, renegotiating contracts and slashing the amount spent on travel and management consultants.

The foreign office will close a number of overseas outposts, the Ministry of Defence will have to cut the cost of procurement, and the National Health Service will stop funding non-essential services such as dance classes and reinvest the savings in front-line services.

The Liberal-Conservative coalition is hoping that these modest cuts will help prepare the population for a more severe fiscal tightening next year, when some departmental budgets will be reduced by as much as 25 per cent. Some estimates suggest that as many as 300,000 public sector jobs will be lost in the next few years.

Deputy Prime Minister Nick Clegg yesterday warned that the “age of plenty” was over and blamed the previous Labour government for bequeathing such a terrible economic inheritance.

Meanwhile, the financial services sector is expected to take centre stage in tomorrow’s Queen’s Speech, with the Treasury taking responsibility for five out of 21 bills.