Prime Minister Rachel Reeves is on track to tighten Whitehall’s public services budget more than expected in a spending review, citing the deteriorating economic outlook, Sky News has revealed.
This puts the Prime Minister at odds with some ministers who have already said they are sacrificing the manifesto commitments they are expected to fulfill – no longer possible with a tight budget – in order to deliver on their pledges. .
The Prime Minister promised in the Budget that day-to-day government spending would be paid for through tax rather than debt, something that has not been achieved for decades.
In October’s Budget, she had just £9.9bn left of a total public spending bill of more than £1trn. The buffer is now just £1bn and could be completely eroded due to weaker economic conditions, with borrowing costs reaching their highest level since 1998.
Sky News understands that the Treasury is prepared to take immediate action to prevent the Office for Budget Responsibility finding in its Spring Statement on March 26 that fiscal rules have been breached. are.
We understand that she will stick to her borrowing commitments, the fiscal rules announced in the October budget. The Treasury also announced that there would be no changes to the tax system in its Spring Statement on March 26.
In that case, Mr. Reeves would be left with no choice but to further reduce the public spending budget and seek additional cuts to the welfare budget that could be politically unpopular.
Can Mr. Reeves cut the public spending budget?
In his budget, Mr Reeves allocated a more generous 4.3% spending increase in 2024/5 and a more modest 2.6% spending increase in 2025/6.
But then she allocated just 1.3% from 2026 to 2029. This is lower than at any point during the Tony Blair and Gordon Brown governments, or at any point during Boris Johnson’s government.
The worsening economic situation means Mr Reeves will have to further tighten the budget and offer an annual rate of less than 1.3% from 2026, with departments such as the Home Office, Justice, Housing, Transport and the Environment. Collision is likely.
The 1.3% increase would already have factored in an increase in defense spending to put Britain’s defense spending on track to reach 2.5% of gross domestic product (GDP), but it makes no sense for the rest of Whitehall. There are few budget cuts, and any further budget cuts are likely to be greeted with fear in the UK. Several cabinet teams.
