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Town halls, the MoD and the police face deeper than expected cuts after George Osborne ordered government departments to make an extra 5% of savings.

The Chancellor has told all Whitehall departments – apart from health, international development and education – to find at least £3billion more cuts before the July 8 Budget.

Mr Osborne is under pressure to slash spending after his election promise not to raise VAT, income tax or national insurance over the next five years.

To balance the books, the Tories need to find an additional £25billion of savings, including £12billion of welfare cuts.

The move raises fears Britain will fail to meet the Nato target of spending at least 2% of GDP on defence and raises spectre of further cuts to local government, police and transport.

There was no mention of the 2% target in this week’s Queen’s Speech , which only promised a new strategic defence review.

The last review in 2010 saw the British Army slashed back by 20% to its lowest level since the Napoleonic Wars.

A Treasury spokesman said: “We are asking departments to identify options. There is no savings target for 2015-16.”

A spokeswoman for the MoD said: “We are confident that we will spend 2% of GDP on defence in this financial year.

“The Prime Minister has also made clear that there will be an annual 1% real-terms increase in spending on defence equipment throughout this parliament.”