In a speech at the Institute of Fiscal Studies on Monday, Mr Alexander will warn that Britain’s large deficit remains a “clear and present danger to stability”.
He will say: “In an environment of economic uncertainty, with ongoing instability in the Eurozone, the UK’s large deficit remains a crucial > economic vulnerability. It remains a clear and present danger to stability.”
His new Whitehall spending rules, which have been agreed with departmental finance directors, “are designed to fundamentally change and improve financial management across all organisations spending public money”.
These rules will “demonstrate the collective determination of government to ensure that never again will our nation’s finances be allowed to get into such a mess”.
Departments will have to put to one side cash reserves worth five per cent of their budgets, or identify programmes that can be cut to provide the cash, to pay for new initiatives or deal with unforeseen events.
Mr Alexander will say he wants “all departments to identify around five per cent of their resource budget that could be re-prioritised if new pressures emerge or new policies have to be funded”.
Taken as a proportion of the £327billion which departments will spend this year - excluding welfare spending and debt interest - it means finding up to £16 billion in savings from current spending plans.
Other changes will see departments being forced to account for their spending every month to the Treasury, rather than on a quarterly basis.
Mr Alexander will say: “Delegated responsibility for spending cannot be an excuse to hide information, close the books, or weaken financial management.
“For too long financial management in Government has been stifled by poor information sharing and poor incentives. That has to change. From now on, all departments must monitor and share spending information with the Treasury on a monthly basis.”
These changes will give Britain “credibility” and show that it is keeping a tight rein on spending.
He will say: “These new controls are not just a tweak to the Whitehall machine. They are another signal of our unwavering determination to deliver the fiscal consolidation we promised.
“It is this focus on delivery that is the cornerstone of our country’s credibility. Credibility, let us not forget, which is delivering the record low interest rates that are benefiting millions of families across the UK.
“That’s why, when we look at the mess Britain’s finances were allowed to get into, we say ‘never again.’”
The scale of the challenge facing Britain was laid bare yesterday by Kenneth Clarke, the Justice secretary and former Chancellor of the Exchequer in John Major’s Government between 1993 and 1997.
Speaking on Sky News’ Murnaghan, he said that an immediate return to the boom time of five years ago was an “illusion”, adding that “it is going to be long, hard work”.
He said: “We’re going to have a difficult time, and I’ve always taken a view that it’s going to be quite a long process to get back to normality. 2012, I think, will undoubtedly be challenging.
"The idea that we put up with two or three difficult months, and we’re back to the kind of boom growth that fooled us all five years ago. That is an illusion. It’s going to be long hard work.
“Fortunately we have a very competent, skilled government that’s leading this country through rather better than most other Western democracies are doing.”
Mr Clarke also betrayed the Government’s nervousness over the fragile economy. Asked on BBC Radio Four if the GDP data would be good or bad news, he said: “It is going to be very close. 2012 is going to be a difficult year.
“We are working our way through a debt crisis while paving the way for growth with low inflation which is probably in international circumstances only achievable in two to three years time if we don’t lose our nerve.”
Mr Osborne’s decision to give more money to the IMF following fears that countries using the euro are on the brink of being plunged back into crisis.
There are growing concerns that Spain and Portugal in particular may require international assistance. Labour’s shadow Business secretary Chuka Umunna criticised the Coalition for lacking “compelling vision of what it wants to do” beyond cutting the deficit.
Speaking on Radio Four’s World This Weekend, he said: “The problem here is of course we’ve got to reduce the deficit. That’s very important, but that can not be the limit of the ambition of an economic policy for the country.
And the problem is beyond reducing the deficit, the Government really has no compelling vision of what it wants to do.”
He accused ministers of failing to pursue the “Government strategies and industrial policy we need to build an economy which will be fit for purpose in the future and promote long-term growth”.