George Osborne has revealed plans for fresh spending cuts this year as he pledged to sell-off public assets to boost the economy.
The Chancellor told business leaders Whitehall departments have been asked to make fresh cuts as he aims to slash spending by £13billion by the 2017/18 financial year.
Mr Osborne told the CBI: "If we want a more productive economy, let's get the Government out of the business of owning great chunks of our banking system - and indeed other assets that should be in the private sector.
"To help that happen, I can tell you that we're merging UK Financial Investments and the Shareholder Executive into one organisation, to return Government investments back to the private sector."
The Chancellor is now creating a new Government-owned company to sell off publicly-owned corporate and financial assets this year.
UK Government Investments is expected to carry out deals worth £23 billion in real terms.
The company will be responsible for the sale of shares in Lloyds Banking Group, UK Asset Resolution assets, Eurostar and the pre-2012 income contingent repayment student loan book.
The new Government's Budget on July 8 will seek to fix "long-term weaknesses" in the British economy, including Britain's poor productivity levels and ailing infrastructure, Mr Osborne said.
A "plan to make Britain work better" will be published over the next few weeks, setting out proposals to improve transport, broadband, planning, skills, ownership, childcare, red tape, science and innovation.
British workers' output levels lag behind other leading nations and the issue has become known as the productivity puzzle.
Bank of England governor Mark Carney warned that boosting productivity is "the key determinant of income growth" and "our shared prosperity depends on it".
But Mr Osborne struck an optimistic tone as he insisted it was within the country's grasp to become the "most prosperous country in the world".
He said: "Let me be clear: improving the productivity of our country is the route to raising standards of living for everyone in this country. So by the Budget I will publish our productivity plan, our plan to make Britain work better. Our future prosperity depends on it.
"It is now within our grasp to make Britain the most prosperous country in the world, and the best place to do business.
"It would be very easy at the beginning of a second term to take our foot off the pedal. That's not what we're going to do.
"I want Britain to find that extra gear. So we deliver for working people. And with your help, that's exactly what I intend to do."
