Chancellor Alistair Darling has confirmed that government borrowing will be lower than predicted in last year’s Pre-Budget Report, while committing the public sector to making "challenging" savings.

Speaking in the House of Commons at lunchtime, Darling said that borrowing would be £167 billion in the coming financial year, rather than the £178 billion predicted in December’s PBR.

He also claimed that “the start of the recovery” would mean that borrowing would fall faster than predicted over the coming years, reaching £100 billion by 2013-14.

Despite this – and despite warning that over-rapid steps to reduce Britain’s deficit would “risk derailing the recovery” – he warned that the coming spending round would be “difficult” and require "savings from across the public sector."

Darling said savings would be made by holding the pay increase of senior civil servants to 1% for two years’ a move that will also affect senior NHS managers and doctors.

He also said there would be "reform" of public sector pensions and that a third of civil servants working in London will be relocated to cheaper areas, staring with 1,000 staff from the Ministry of Justice.

Whitehall departments will be expected to find £11 billion of additional savings by 2012-13, with £4.35 billion of that coming from the Department of Health.

Darling also confirmed that £5 billion would be trimmed from government IT programmes. The Pre-Budget Report identified the National Programme for IT in the NHS as one of the programmes to be affected.

This afternoon, the DH said £100m of savings will be found by "taking a new approach that offers greater choice to local hosptials" as "part of the £600m reduction in lifetime costs announced in December".

As E-Health Insider has been reporting, the lifetime cuts will be made through a combination of reducing the functionality of the ‘strategic’ electronic patient record, Lorenzo, and delivering Lorenzo and Cerner Millennium to fewer trusts.

This morning, Conservative MP and member of the Commons Public Accounts Committee, Richard Bacon, released a letter to EHI that raised serious concerns about whether the ‘descoped’ contracts will offer value for money.

In a note setting out its "contribution" to the government savings drive, the DH also dentified procurement, energy and staff sickness as areas for immediate action.

It also confirmed that it will be looking to make efficiency savings of up to £20 billion by 2013-14, with significant sums to come from improving productivity, the management of long-term conditions, commissioning and procurement.

Several of these initiatives may require heavy use of IT. For example, the DH says £2.7 billion could be saved by reducing emergency admissions and shifting care to the community; which implies using of IT systems to predict risk and deliver care remotely.

In the Budget, Darling also made some small announcements about supporting the digital economy and the need for the public sector to use IT to deliver services in more cost effective ways.

He confirmed that the government will levy a charge of 50p per month on landlines to pay for fast broadband in rural areas by 2017, arguing that telehealth was one of the areas that would benefit.

Other highlights of the Budget included support for small businesses and young unemployed people, taxes on bankers, and a crackdown on tax havens including Belize, the home of Tory supporter Lord Ashcroft.

Conservative Party leader David Cameron hit back by opening his response to the Budget by saying it was an "obituary, not a manifesto."

Link: The Budget speech in full.

The Department of Health’s response.