Mr Clarke said he had already agreed cuts in his budget
Ken Clarke has said legal aid budgets could be cut as part of efforts to save money across the legal system.
The new justice secretary said he had already agreed cuts to his departmental budget with his Lib Dem colleague, Treasury Chief Secretary David Laws.
"We have to improve the service for less money," he told the BBC Politics Show East Midlands, promising a "sensible" approach to making savings.
The coalition government is to announce details of £6bn in cuts on Monday.
Ministers have said this is a necessary first step in showing the UK is serious about tackling its huge budget deficit over the next five years but insist frontline services will be protected.
All departments excluding health and international aid - which are ring-fenced from budget cuts - are likely to be affected by this year's spending squeeze and future anticipated cutbacks.
In an interview to be broadcast on Sunday, the former chancellor said this Parliament would be the "most difficult" he had known in nearly 40 years in politics in terms of the financial challenges facing the government.
Describing Mr Laws as the "hatchet man", Mr Clarke said he had already discussed cuts in his own department.
"There will have to be cuts - we have to improve the service for less money," he said.
Mr Clarke said he "could save money on legal aid" but would proceed sensibly rather "cutting here and there".
He also confirmed he would fulfil a manifesto commitment to review sentencing policy in England and Wales to make sure it was "still appropriate".
Before the election, the Lib Dems called for an end to all custodial sentences of less than six months to reduce prison over-crowding and to encourage alternative ways of dealing with repeat offending.
Mr Clarke suggested he wouldn't go "that far" but said the government must ensure it was "imprisoning the right people" and not simply filling prisons with "inadequates, waifs and strays".