Reeves faces budget backlash: ‘It’s going to feel like austerity’
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Rachel Reeves has promised not to be an “austerity Chancellor”, but can she stick to this promise if government departments are having their budgets cut?
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In brief…
- Senior ministers have written to the Prime Minister expressing their alarm over Chancellor Rachel Reeves’ spending plans.
- They are reportedly shocked at the constraints set to be imposed in the Autumn budget, raising concerns about the political feasibility of departmental cuts.
- The News Agents say this will hurt Labour, and could go against Reeves’ promise not to introduce “austerity” measures.
What’s the story?
We’re just a few weeks away from Rachel Reeves’ first defining moment as Chancellor - when she unveils Labour’s spending plans for the coming year in the budget on 30 October.
But she is already facing a backlash from heads of other government departments, who are worried about the tight spending limits she is set to impose on them.
Senior ministers have reportedly gone over Reeves’ head by sending a letter to the Prime Minister expressing their alarm.
While Keir Starmer and Reeves did warn that there would be “difficult decisions” to make come the budget, Lewis Goodall says on The News Agents that the “eye-wateringly tight” spending limits have still come “as a massive shock” to a lot of ministers.
This leaves Reeves with a potential problem as she scrambles to plug the £22 billion fiscal black hole she says was left behind by the Tories.
In July, she first promised not to be an “austerity Chancellor” in an interview with The News Agents.
If it is true she has asked departments to shave off millions of pounds to their budgets, can it be described as anything but this?
Labour budget backlash escalates to 'a whole new level'
What does this mean for the public?
Not only are ministers shocked, but reports suggest they are concerned that the alleged cuts are not politically feasible and that they will struggle to deliver on Labour’s election manifesto promises.
While Labour says it has found money to invest in things such as infrastructure and equipment for the NHS, it is on day-to-day spending where things get a little more tricky.
It could mean things like welfare and local government spending are vulnerable to cuts.
Lewis says: “I think that’s the thing that most people notice, whether it's in local government or the Ministry of Justice, education as well.”
A source in the Ministry of Housing told Lewis that “in order to try and make the books add up, they have been considering cuts of like £600 million to the UK shared prosperity fund.”
This is a huge pot of cash to invest in local communities across the country.
“That's supposed to level-up things across the country, to pay for homelessness services, or to try and plug gaps in local government,” he says.
He adds: “The Treasury has got local government coming to them saying ‘if we do not have more money than you're currently proposing, service after service after service, whether it's homelessness, for children, whatever it happens to be, are just going to go under’.”
What’s The News Agents take?
Emily says the fact that department heads are going over the Chancellor's head straight to the Prime Minister, “must be undermining” and the fact it has been leaked doesn’t help.
She adds: “When it comes to current spending, I think there is a feeling that the Treasury probably has too much power, is too reactive.”
But can this be described as austerity?
Emily says: “It depends how they frame it. It won't be cuts to prison spending, it won't be cuts to flood defence spending. But as soon as you start talking about children's services… ”
Emily argues that it even gives Labour the chance to show leadership if they go about it the right way.
She says Labour could simply blame the Conservatives for making Labour’s situation with schemes such as the failed Rwanda plan which never materialised, forcing them to become the government who “clears up the mess”.
But Lewis argues that whatever Labour tries to present it, it “hurts and does something they weren't going to do.”
For the departments being asked to make millions of pounds of savings, Lewis says it is “very clear that it is still going to feel like austerity… It's hard to describe it as anything else.”
Listen in full on The News Agents.
