Analysis By Robert Chote Director of the Institute for Fiscal Studies

Public spending negotiations are routinely described as the toughest ever, but those preceding Gordon Brown's Spending Review next Monday have been tougher than most.

How will Mr Brown spend his cash?

With the general election perhaps only 10 months away, ministers have been fighting over a smaller total increase than in previous reviews - and all have been badgered for efficiency savings so that the chancellor can promise a bigger bang for every buck.

The squeeze is tighter this time round because the government has financed the significant increase in public spending it has delivered since 1999-2000 largely through extra borrowing.

To stem the flow of red ink and meet the limits on borrowing that the chancellor set himself shortly after taking office, Mr Brown now has to increase the tax burden and - once the election is out of the way - slow the pace of spending growth.

Health is a winner........

We know already from the Budget that public spending will rise by 2.7% a year on top of inflation in 2006-07 and 2007-08, the years for which departmental allocations will be announced for the first time on Monday.

This compares to an average of almost 5% a year in the previous three years covered by the 2002 Spending Review (the last year of one spending review overlaps with the first year of the next).

Having risen from 37.4% of national income in 1999-2000, spending will level off at a little over 42%.

We also know that the National Health Service will be spared the squeeze.

It will enjoy real spending growth of around 7% a year in 2006-07 and 2007-08, in line with recent years.

....and so is defence......

Education, however, will get a little more than 3% a year; less than its recent increases, but more than most departments can expect.

MoD dismisses 'huge budget cuts'

Once health and education have been paid for, the chancellor can afford an average real increase elsewhere of 1.4% a year.

If we assume that those areas of spending that are not amenable to multi-year planning (such as debt interest and social security payments) grow in line with the Treasury's assumptions in last year's Budget, the potential increase for other departments is actually slightly higher at around 1.7% a year.

But this still represents a falling share of national income.

Mr Brown has already promised that defence, the home office, transport and international development will get real increases.

This already marks out defence as a winner relative to the recent past, with its budget currently forecast to fall in real terms by 0.8% a year in the three years from 2003-04 to 2005-06.

International development should do well relative to other departments (but maybe less well relative to the recent past), as the government has promised to increase overseas aid as a share of national income.

In addition to identifying departmental winners and losers, attention on Monday will be focused on Mr Brown's efforts to secure efficiency savings and reductions in civil service numbers.

....but the civil service faces cuts

As public spending has risen, so the number of civil servants has climbed from less than 500,000 in 1999 to more than 550,000 in 2003, reversing the decline of the previous four years.

NHS: more money, higher targets

With expectations raised by the efficiency review conducted by Sir Peter Gershon, Mr Brown is expected to announce some headline-grabbing cuts.

More broadly, Mr Brown said in the Budget that he wanted to secure 2.5% efficiency savings each year across the entire public sector, saving �20bn by 2007-08.

This, he believes, would be sufficient to maintain the current growth rate of spending on front-line services (the things voters notice), even as total growth in public spending slows.

Mr Brown's key political challenge is to convince the voters that these savings can be delivered without harming public services, and that the money can be reallocated to their benefit.