Unprotected spending areas will face cuts of between 18 and 24 per cent by 2014-15, the Institute for Fiscal Studies (IFS) has calculated.

The body's annual "green budget", which also contains data on public sector pay, says the cross-party commitment to avoid cuts in areas such as health, overseas aid and education will leave other departments picking up the bill.

IFS economist Rowena Crawford said that an 18 per cent cut at the Ministry of Defence "means something on the scale of no longer employing the army", while in transport it is equal to a third of the government's grant to Network Rail.

The institute has recommended that plans for reducing the deficit are made as soon as possible - it has suggested that the government could go further than already planned, by extending the freeze on public sector pay and freezing benefit payments.

On pay, the IFS budget reports that public sector workers are not paid more than their private sector counterparts once educational attainment is taken into account, although they do benefit from better pension arrangements.

The report also looks into the system of national pay bargaining and calls for the centralised arrangements to be abandoned.

Figures show that average public sector pay in London and the South East is lower than the private sector, but elsewhere in the country it is higher.

Alison Wolf, professor of public sector management at King's College London, quoted in the Financial Times, said that national pay systems "do real damage to local services and local economies. And it is the poorest and most vulnerable that are hit hardest."