David Cameron has announced an audit of the government's books after finding examples of "crazy" spending decisions in Labour's last year in power.

The prime minister told BBC One's Andrew Marr show the review would be launched on Monday by the new Office of Budget Responsibility.

He also said there would be a crackdown on top civil service pay and bonuses.

And he reassured Lib Dems that deputy prime minister Nick Clegg would be part of the "inner core" of his government.

Mr Cameron said the audit would form part of a wider programme to set out government spending plans for the coming three years.

He said that would involve "difficult decisions" in most Whitehall departments to reduce Britain's record budget deficit.

'Stink bombs'

He also refused to rule out an increase in VAT in Chancellor George Osborne's forthcoming emergency budget, but said: "We believe that spending should bear the brunt of the burden in terms of cutting the deficit."

Mr Cameron announced the setting up of an inquiry into top civil service salaries, to be headed by left wing campaigner Will Hutton, vice chairman of think tank The Work Foundation.

He said he wanted a clampdown on civil service bonuses, which he expected to be reduced by two-thirds, saving £15m a year.

The prime minister said: "What we have seen so far are just individual examples of very bad procedures and bad behaviour, spending decisions taken in the last year or so of the Labour government that no rational government would have done - giving something like 75% of senior civil servants bonuses after everything that's happened in the current year.

"That's not a fiscal stimulus. It is a crazy thing to do. We are beginning to find individual decisions like that."

His words appeared to be backed up by Scottish Secretary Danny Alexander, a Liberal Democrat, who suggested on BBC One's Politics Show that Labour may have been reluctant to do a coalition deal with the Lib Dems because they knew what was in store for an incoming government.

"Maybe one of the things they've been doing over the past few months is laying a few stink bombs around Whitehall, and maybe some of them knew that and didn't want to be there when they went off," he said.

Mr Cameron said NHS managers and other senior civil servants should not earn "more than 20 times the lowest paid" in their organisation and they should not be paid large bonuses, of the kind he said had been approved "in the the last days of the Labour government".

The same principles should apply to the BBC, he added, although the corporation would not be included in the review as it was independent.

'National interest'

Labour MP Frank Field is also understood to have been offered a role with a new Poverty Commission.

Mr Field was minister for Welfare Reform in Tony Blair's government and last year led a successful campaign against the abolition of the 10p tax band.

Mr Cameron said he had considered trying to set up a Conservative minority government, with a Lib Dem agreement not to vote it down, rather than a full coalition, when his party failed to win an overall majority in last Thursday's general election.

Although such a move would have been "easier and simpler" and was what people expected, Mr Cameron said he and Mr Clegg " decided to take that risk" and go for a full coalition which he said was "in the national interest, had a majority and is strong and stable".

He said a document would be published shortly setting out in greater detail how the coalition will work together - but he insisted Mr Clegg would be in the "inner core" of the government, which meant he would chair cabinet committees, which guide policy formation, and be consulted on ministerial appointments and sackings.

"The deputy prime minister is clearly part of the inner core. When it comes to government appointments and, if I can put it this way, disappointments, of course that is the prime minister's job.

"But this is going to be something that we try and do together".

'Progressive alliance'

Mr Clegg will stand in for Mr Cameron at prime minster's questions, when the Conservative leader cannot attend, but Lib Dem MPs would continue to sit together in the Commons and the two parties would fight each other at by-elections.

But the prime minister made clear he expects the two parties to work closely together in government and hopes to avoid holding separate "political cabinets" made up only of Tory or Lib Dem ministers.

Like Mr Clegg, Mr Cameron acknowledged the coalition deal would upset some in his party, but insisted it was more than a marriage of convenience, saying: "I have always described myself as a Liberal Conservative."

And he paid tribute to the "brave and courageous" actions of Mr Clegg, whose party is meeting later to discuss the coalition deal and who has faced criticism from one of his predecessors, Charles Kennedy.

Mr Cameron described his deal with the Lib Dems as a "progressive alliance" based on shared values of "more freedom in our society" and the decentralisation of power. He insisted "this is not just about a group of people who have got together for power".

http://news.bbc.co.uk/1/hi/uk_politics/8685125.stm

I wouldn't be surprised if Labour types had laid a few 'stink bombs' to be honest

It depends which version of the books Darling left behind, if you get my drift…

It depends which version of the books Darling left behind, if you get my drift…

Maybe the police should look at some of these contracts. if they are front loaded then the police should arrest company directors and civil servants, maybe even ex-ministers for fraud.

It depends which version of the books Darling left behind, if you get my drift…

Mr Laws said his predecessor, Liam Byrne, had left him a letter, which he assumed had been some advice on how he should conduct himself in the months ahead.

"Unfortunately, when I opened it, it was a one-sentence letter which simply said 'Dear Chief Secretary, I'm afraid to tell you there's no money left', which was honest but slightly less helpful advice than I had been expecting," he said.

Mr Byrne told the BBC saying there was no money left was "a phrase that chief secretaries have to get used to using I'm afraid. Chief secretaries have to be tough - they are the unpopular ones in government.

"I'm sure it won't be too long before Mr Laws is using it with his colleagues," he added.

On the national debt, the independent Institute for Fiscal Studies said yesterday that public debt could double from Labour's official figure of £890billion to a staggering £ 1.79trillion (£1,790billion), once the massive bill for public-sector pensions plus schools and hospitals built under Mr Brown's cherished 'private finance initiative' is taken into account.