Chancellor George Osborne is preparing for a Budget on 22 June
Ministers are to give details of a "once-in-a-generation" look at the way the government works, ahead of cuts.
The Treasury is to ask for people'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.
George Osborne is answering MPs' questions and is due to outline the "framework" of the spending review.
He said he wanted people to be involved in the "big national challenge of how we get this country to live within its means". But he was challenged by Labour MP Tony Lloyd who said he should admit the government's plans for cuts were "very risky" and could plunge the UK back into recession.
Prime Minister David Cameron has warned of "unavoidable" cuts ahead as he tackles the S156bn budget deficit and warned they would affect "our whole way of life".
The Conservative-Lib Dem coalition government has already outlined plans for S6.2bn of cuts this financial year and is preparing for the Budget on 22 June and a departmental spending review in the autumn.
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 expected to create a special committee - dubbed a "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?
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- The term is used now for an ad hoc group of people given power to rule for or against things - in this case spending
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- 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.
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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."
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 Alistair 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.
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