Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Sir Keir Starmer, prime minister, on Wednesday joined forces with chancellor Rachel Reeves to face down a cabinet revolt over plans for “grim” curbs to public spending next year.
Reeves has faced resistance from a number of ministers over her plan to rein in public spending in 2025/26, with some cabinet colleagues writing letters to Starmer to complain about the Treasury’s approach.
As talks about what will be in the Budget on October 30 went down to the wire, one ally of the prime minister said Starmer was holding firm.
The FT revealed on Tuesday that Reeves was looking to raise taxes or cut spending by around £40bn in the Budget, as she seeks to fill a £22bn “fiscal hole” of unfunded commitments and spend money on Labour’s priorities.
Government officials said departments covering local government, health, justice, defence, transport and environment were among those facing the toughest financial challenge. One said the planned spending curbs were “grim”.
Treasury veterans often dismiss the protests of spending ministers as “shroud waving” or the brandishing of “bleeding stumps”, but one senior government official said there was real unhappiness within cabinet.
“Ministers and departments feel that what they are being given is very miserable,” said the official. “They are worried about what it means for government ambitions and commitments.
“But of course they can’t see the overall picture — quite how difficult the inheritance really is and the scale of the pressures on tax and borrowing. But it’s very, very difficult for all of them.”
A government adviser said: “We keep being told the primary mission of government is to grow the economy but some of these cuts are contrary to that. People think the cuts will undermine the growth mission. And there will be repercussions for people’s lives.”
A minister said that while it was “absolutely normal” for colleagues to write to the prime minister during a spending round — the letters were first reported by Bloomberg News — the tactic would backfire on them.
“It’s only a handful of ministers and it doesn’t do them any favours,” said the minister. One ally of Starmer said: “It’s bog standard horse-trading.”
The spending round for the next financial year came to a head on Wednesday, the deadline for Reeves to send over her final pre-Budget plans to the Office for Budget Responsibility.
Reeves and her Treasury chief secretary Darren Jones have demanded efficiency savings and the scrapping of some projects inherited from the last government.
Reeves told the Financial Times she wants to “wipe the slate clean” at the Budget, before setting out plans to increase public spending — notably on the NHS — later in the parliament.
Reeves’s Budget will confirm spending plans for 2025/26 but will also set out expanded departmental spending priorities for the next five years.
Next spring Jones will lead a second and more substantial three-year spending review, which will allocate money to individual departments for most of the rest of the parliament.
Reeves on Tuesday joked at a Downing Street reception that Jonathan Reynolds, business secretary, was “one of my favourite ministers” because he had settled his one-year budget. “Not everyone has,” Reeves added.
Defence insiders warn of multibillion-pound shortfalls both this year and next in the MoD’s existing budget. But they hope the spending review in the spring — which will dovetail with the publication of the government’s strategic defence review — will be more generous and set out a path towards expenditure reaching 2.5 per cent of GDP.
