The warning that carers’ bonuses may be scrapped in the Budget is only the first of what are likely to be a number of razor slash stories between now and Budget night, the majority of them sourced from a Government keen to soften the fiscal blows it intends to mete out in May.

But the 2008 Budget process is only the beginning of what, if the Government keeps its nerve, will be the most fundamental assault on Commonwealth expenditure in a generation, more dramatic even than the efforts of the Howard Government in its all-too-brief phase of fiscal rigour in 1996-97.

The Government’s Strategic Budget Committee (SBC) has been at work since December identifying savings. The committee grew out of the shadow Expenditure Review Committee (ERC) established by Kim Beazley shortly before Rudd took over, comprising Wayne Swan, Lindsay Tanner, Joel Fitzgibbon (now Chris Bowen), and Nick Sherry. The ERC process that will kick off shortly will start the detailed process of working out how far those savings measures go.

ERC is no mere bureaucratic ritual. Even in relatively prosperous years, it can be a bloodsport in which ministers and their public servants go into hand-to-hand (well, pencil-to-pencil) combat with the Finance Minister and his staff over savings and spending proposals.

This year, in addition to looking for savings to offset election commitments, portfolios will be reporting back on the homework handed out back in January by the SBC. After the election, Finance officials opened their bottom drawers and pulled out savings proposals that they could never interest Howard and Costello in. Many of these are radical options for saving big dollars in high profile – some would say sacrosanct – programs. Each portfolio was told to do the numbers on them and be prepared to argue the case. As a consequence, ERC will be far uglier and bloodier than usual, and Tanner is unlikely to be popular with his colleagues. No minister forgets the humiliation of being mauled in ERC.

The Government is also taking a different approach to expenditure outside the Budget. Under the previous Government, major spending proposals were often considered by Cabinet, without a requirement for offsetting savings, or even dealt with in correspondence between Ministers, to the inevitable chagrin of Finance. In the first flush of fiscal rigour, the Government has decided it will have a rolling ERC process throughout the year to vet expenditure, ensuring the politically-motivated spending that is a natural part of governing at least goes through a formal process.

But the most significant initiative by Tanner is the establishment of a twelve-month review process, to be run by his officials, that will go through all Commonwealth expenditure line-by-line. This is the sort of root-and-branch search for savings that hasn’t been done for decades, and has the potential to identify the sort of hollow logs that abound across departments – especially discretionary grants programs that enable Ministers to spend money on projects that take their fancy. These are rarely large, but there’s a hell of a lot of them.

Tanner’s long-term problem is whether his colleagues, up to and including the Treasurer and the Prime Minister, will have the same hunger for savings in 2009, with an election not much more than a year away, as they do now. His most famous predecessor, Peter Walsh, was eventually worn down by his inability to rein in the excesses of the Hawke Cabinet, and left in disgust. But by putting in place stronger expenditure control processes, and a root-and-branch review of all spending, Tanner is giving his Government the best possible chance of avoiding the drift into profligacy that claims most governments.