Quote: Ministers are to give details about a "once-in-a-generation" re-examination of the way the government works, as it prepares to make "painful" cuts.
The Treasury is to ask for the public's views on which functions the government should perform and which could be done by other bodies to save money.
A "star chamber" of senior figures will be created, before which ministers will have to justify their spending.
The PM has warned of unavoidable cuts ahead as he tackles the budget deficit.
David Cameron said on Monday the country must prepare itself for painful and unavoidable cuts which will affect "our whole way of life".
The Conservative-Lib Dem coalition government has already outlined plans for £6.2bn of cuts this financial year and is preparing for the Budget on 22 June and a departmental spending review in the autumn.
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Labour says the government is wrong to focus on cuts not growth.
Chancellor George Osborne is expected to outline the "framework" for future spending decisions at Treasury questions in the House of Commons later, and will also take part in a debate in Parliament on the economy.
BBC political editor Nick Robinson said the Treasury would be publishing a document inviting the public, business groups, trade unions and think tanks to join a debate designed to produce a "fundamental re-evaluation of the role of government".
In an idea copied from Canada's successful deficit-cutting strategy from the 1990s, it will ask people to discuss whether the government needs to provide certain public services at all, or whether other organisations, such as councils, voluntary groups or companies, could do so more cheaply.
'More for less'
Mr Osborne is to create a special committee - or star chamber - of senior ministers and "the best and the brightest civil servants" who will aim to challenge rather than defend existing Whitehall spending patterns.
WHAT IS A STAR CHAMBER?
* The term is used now for an ad hoc group of people given power to rule for or against things - in this case spending
* The term was also used last year to describe the panels parties set up to review their MPs' expenses claims
* The name comes from the room in the old Palace of Westminster in which medieval King's Council met
* The Star Chamber tribunal of privy councillors and judges was a court of law from 1485 until 1641
* It oversaw operation of lower courts and heard direct appeals mostly about property disputes, corruption and public disorder
* Heard cases in private and had freedom to decide on punishments ranging from fines to mutilation.
Ministers could be asked to consider whether services currently provided by their departments could be better supplied by the private or voluntary sectors.
They could be questioned about their methods of delivery and challenged to find ways of "doing more for less".
Any minister who agrees to make cuts in his department's spending will be invited to sit on the committee and give his or her verdict on their colleagues' spending plans.
A Treasury official said: "Anyone who thinks the spending review is just about saving money is missing the point.
"This is a once-in-a-generation opportunity to transform the way that government works."
Mr Cameron said on Monday that the state of the public finances was "even worse than we thought", suggesting the UK would be paying £70bn in debt interest within five years - more than it spent on schools in England, tackling climate change and transport.
'Chilling attack'
Without prompt action, he said, taxes would increasingly be used to pay debt interest rather than being spent on public services.
He has called for a "proper debate" involving as many people as possible about future spending choices and has pledged not to cut the deficit "in a way that hurts those we most need to help" or "that divides the country".
Labour have accused the Conservatives of exaggerating the scale of what they have found since coming to power in order to soften up the public for future spending cuts.
Shadow Chancellor Alastair Darling said it was thanks to Labour's actions that the government had inherited a growing economy, and the proposal for immediate cuts risked the prospect of recovery.
Unions, meanwhile, have warned of a "chilling attack" on the public sector and said the financial sector must make more of a contribution to reducing record levels of borrowing, having been responsible for the recession. | 
