Rishi Sunak has scrapped proposals to axe 91,000 Civil Service jobs as he criticised "top-down targets" set under Boris Johnson's Government.
The controversial policy - to reduce the Civil Service by a fifth - caused uproar among unions representing Government employees and threats of strike action.
The Prime Minister's official spokesperson said there would still be reductions in the Civil Service - but insisted there would be no "specific target".
In a message to Civil Servants Mr Sunak said that he and the Chancellor Jeremy Hunt will ask individual departments to "maximise efficiency within budgets".
Writing on Tuesday, the Prime Minister said: "Together, we must make sure every taxpayer pound goes as far as it possibly can."
But he added: "I do not believe that top-down targets for Civil Service headcount reductions are the right way to do that.
"Instead, the Chancellor and I will be asking every Government department to look for the most effective ways to secure value and maximise efficiency within budgets so that we can use taxpayers' money sustainably in the long term."
The move comes after the former Prime Minister Mr Johnson told his Cabinet ministers in March to bring forward plans to cut staffing in their departments.
He had told them he wanted to see the Civil Service headcount return to 2016 levels which would mean a cut of 91,000 staff.
Mike Clancy, the General Secretary of the Prospect Union, said: “The fact the PM has jettisoned the 91,000 job cuts simply underlines it was an arbitrary number announced without a plan to achieve it."
He also warned that due last month's disastrous mini-Budget "public finances are in jeopardy such that the government remains hell-bent on another round of damaging austerity."
“Attempts to slash departmental budgets in real terms at this time will bring disaster for vital services and, despite this reversal on the 91,000 jobs target which Prospect and the other Unions have argued for, it will leave many dedicated public servants still fearful for their jobs."
A Government spokesperson added: "It is the role of a responsible Government to identify how to deliver the best outcomes for the public as efficiently as possible.
"That's why departments have been asked to look for the most effective ways to maximise efficiency within their budgets, to ensure the best value for taxpayers both now and in the long term."
