SCOTLAND'S annual block grant is set to be cut by hundreds of millions of pounds in a knock-on effect from George Osborne's attempt to find £11.5 billion of extra savings across Whitehall budgets.

Politically, this will open up the Coalition to attack from its opponents in the run-up to the General Election, given that the savings will come in 2015.

A senior Treasury source stressed that it was, at this stage, impossible to determine the scale of the reduction on Scotland's £30bn annual block grant but admitted: "We are making spending reductions across the board. Yes, they will have an impact on the Scottish block grant."

The source pointed out how some of the bigger budgets, such as health and education, were being protected and that because capital spending for 2015 was due to increase, this would have a positive effect on the block grant.

However, he acknowledged that overall the impact would be negative and would result in it being shaved by "hundreds of millions" of pounds.

The Chancellor has made clear he is "pretty confident" he will not need to raise taxes nor further cut Britain's welfare spending to find the £11.5bn of savings.

Yesterday, he took to the airwaves to announce that he had reached provisional settlements with seven out of 24 UK Government departments, which have agreed to cut their budgets by up to 10%.

The seven ministries are Justice, Energy, Communities and Local Government, Northern Ireland, the Foreign Office, Cabinet Office and the Treasury.

The seven are comparatively small spenders and the total cuts now agreed amount to just 20% of the £11.5bn total, meaning the Chancellor still has to find the lion's share of more than £9bn.

Asked if, by announcing the seven now, a month early, Mr Osborne was trying to exert pressure on other departments to agree to their savings, a No 10 spokesman simply said: "The process is on-going."

The haggling over budgets is likely to go on for some time, with one Whitehall insider saying: "This will go right to the wire."

The Chancellor also made clear that, in the wake of the murder of soldier Lee Rigby in Woolwich last week, he was "not going to do anything that is going to endanger the security of this country at home or abroad or the fight against terrorism."

However, he added: "That doesn't mean that you can't take a vast institution like the Home Office and look for savings."

The bigger spending departments that still have to reach a settlement include not only the Home Office but also the Ministry of Defence and Business.

While reports suggest Work and Pensions Secretary Iain Duncan Smith was willing to offer extra cuts of £3bn, the Chancellor indicated he was not looking for any more savings from benefits.

Mr Osborne said: "My central assumption in this spending review is ... that we have already found billions of pounds of welfare savings this year and we have got to make sure that Whitehall is not let off the hook, that there are still substantial savings, better value for money, we can get for taxpayers' money out of the machinery of government."

Business Secretary Vince Cable made clear the Liberal Democrats would resist further welfare cuts.

"Simply taking more off people at the bottom end of the scale is not the right way to proceed," he said.

"The Liberal Democrats have said if we are going to look at entitlements, it's got to be people at the top that we start with."

Labour's Chris Leslie insisted Mr Osborne should be concentrating on "taking action to get the economy growing strongly between now and 2015" while the TUC's Frances O'Grady said the Chancellor "should be brave enough to borrow money in the short-term. This investment will pay for itself in the long term with extra jobs and growth".