Bankers are to review state spending as part of a push to bring the private sector “into the heart of government”.
External oversight is to be incorporated into the first line-by-line spending review of government departments in 17 years.
Under plans announced by the Chancellor Rachel Reeves “every pound” of government spending will be interrogated to ensure it represents value for money.
Departments will be expected to find savings and “efficiencies” in their budget as Ms Reeves said she wishes to remove waste in the public sector.
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“The previous government allowed millions of pounds of taxpayers’ money to go to waste on poor value-for-money projects,” she said.
“We will not tolerate it; I said I would have an iron grip on the public finances and that means taking an iron fist against waste.”
Departments will be told by Ms Reeves they cannot operate in a “business-as-usual way” when reviewing budgets.
The new budgets will be scrutinised by “external experts” including former senior management of Lloyd’s Bank, Barclays, and the Co-op.
These budget examiners will bring “an independent” view into what spending is necessary, the government said.
Other experts will be academics, from thinktanks and other parts of the private sector.
All spending must contribute to the government’s stated aims or it won’t be funded.
“Some of these decisions will be difficult,” the government said, as spending should be stopped if it is not contributing to a priority.
The private sector will also be able to contribute to government budgeting through the launch of an online feedback portal for policy proposals.
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The chancellor is seeking to cut state spending after she identified a “£22bn black hole” between state spending and revenues.
Her October budget laid out plans to cut spending in the coming years with departments required to meet a 2% “productivity, efficiency and savings target”.
On Monday the government launched a £100m fund and called on “disruptors, innovators and creative thinkers” to help make the civil service more productive.
New “test-and-learn teams” will be put into public services across the UK to “experiment and innovate” in an effort to “fix the public sector’s biggest challenges”.
