A return to the bad old days when hospitals, schools and government departments wasted money to stop the Treasury clawing it back is on the cards, MPs warned on Monday.

A cash-strapped Treasury is limiting the ability of departments to carry forward unspent capital and revenue from one year to the next, the Commons’ public accounts committee said. Current arrangements “may no longer incentivise departments to manage their budgets in a way that represents optimum value for money”, according to the public standards watchdog.