Chancellor Alistair Darling has begun holding one-to-one meetings with cabinet members to look at possible spending cuts, the BBC has learned.
PM Gordon Brown admitted this week cuts were needed in "unnecessary" spending.
Ministers are being asked which programmes they believe could be sacrificed and which should be spared.
Tory leader David Cameron said it was "extraordinary" the process had only just begun and said the government had lost control of the UK's finances.
The Tories have accused Mr Brown of keeping the truth about spending cuts from the public and MPs after he spent months denying they were needed.
Mr Darling is understood to have persuaded Mr Brown to admit publicly that cuts will be needed, something he did for the first time in a speech to the TUC on Tuesday, although he said Labour would not "support cuts in the vital front-line services".
And the chancellor is now expected to include more detail than previously expected about where the axe might fall in his autumn Pre-Budget Report, in an attempt to put pressure on the Conservatives to spell out their planned cuts, the BBC's political editor Nick Robinson says.
Consideration is being given to the idea that the cabinet as a whole should agree where the spending axe should fall so that, as a previous chancellor once graphically put it, all get to dip their hands in the blood
The Comprehensive Spending Review, which sets departmental budgets for the following four years, has been delayed until after an election.
But Treasury officials spent the summer examining ways to make savings now, particularly in areas where quangos and government departments have overlapping responsibilities.
They are believed to have identified about £4bn of potential savings so far, by improving the use of space in hospitals and police working methods.
The BBC understands Mr Darling has now begun holding one-to-one meetings with cabinet colleagues to establish their spending priorities and to identify possible savings in their departments, although it is not thought they will be talking in terms of percentage cuts to budgets.
Nick Robinson says some ministers favour scrapping the controversial ID cards scheme but the Home Office has said there have been no discussions about this.
The Ministry of Defence has also ruled out cancelling the replacement for the Trident nuclear weapons system, although there have been suggestions it could be scaled back from four submarines to three, he adds.
Our government seems to have been entirely asleep on the job
The campaign group Greenpeace has said in a report scrapping Trident would save £34bn - the government estimates that replacing the submarines and warheads would cost £15bn - £20bn.
Official borrowing figures out on Friday show public sector net borrowing reached £16.1bn in August taking net borrowing to £65.3bn for the five months of the financial year so far.
Conservative leader David Cameron said: "They have completely lost control of the nation's finances and the news today that finally the chancellor is calling in ministers to look at spending reductions is extraordinary - what has this government been doing for the last year?
"Families have been sitting around the kitchen table looking at their budget, businesses have been sitting around the boardroom tables working out how to trim their costs and live within their means and yet our government seems to have been entirely asleep on the job."
David Cameron: "Labour has completely lost control of the country's finances"
Meanwhile the Liberal Democrats' Treasury spokesman, Vince Cable has said "eventually" a "combination of spending and tax measures" would be needed to help address the £175bn budget deficit - which is expected by the end of this financial year.
Asked about the meetings Mr Darling and Cabinet ministers, the prime minister's official spokesman said: "The chancellor has meetings with colleagues on a regular basis. We don't go into specifics on these meetings. Public spending is always a matter for the chancellor and something he'll return to at the time of the Pre-Budget Report."
He added that the borrowing figures were "broadly in line" with what the government had expected.
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