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Chancellor Rachel Reeves is set to demand that government departments identify efficiency savings worth 5% of their current budgets as part of a spending review for up to 2029. Alongside this, she will be instructing ministers to cease spending money that does not contribute to the government’s priorities and promises to take an “iron fist against waste”. In addition, department budgets will be subject to scrutiny by panels, including former senior bankers, in order to advise on which spending is necessary.
Conservative MPs have criticised the move, accusing Reeves of having an inadequate grasp of her own departments, and not yet working out how to balance Labour’s sums without increasing taxes or borrowing funds. However, Shadow Treasury minister Richard Fuller admits that delivering value for money to taxpayers is an admirable goal, but claims that Reeves has granted inflation-busting pay raises to Labour’s union paymasters without mandating any reciprocal changes or reforms in public sector productivity or welfare spending.
Liberal Democrat Treasury spokesperson Daisy Cooper has urged the government not to cut spending in areas like social care, warning that doing so would be an unfortunate false economy which would only endanger people and harm public finances. She recommends that investing properly in social care could save billions of pounds in the NHS budget.
The Treasury has declared that “every single pound the government spends will be subjected to a line-by-line review to make sure it’s being spent to deliver the Plan for Change and that it is value for money,” and that departments will be advised to halt spending when it does not contribute to key priorities. The Chancellor will partner with departments to prioritise expenditures that aid in meeting the milestones outlined in Sir Keir Starmer’s Plan for Change. Department budgets will be scrutinised by panels featuring former senior management at Lloyd’s Banking Group, Barclays Bank, and the Co-operative Group, as well as think tank experts, academic specialists, and people from the private sector, who will provide an external perspective on what government spend is or isn’t essential.
One programme mentioned by the Treasury that the government intends to cut is a scheme that placed social workers in schools, which cost £6.5m but had no evidence of positive impact on social care outcomes, according to an evaluation. Reeves has suggested that the previous government allowed millions of pounds of taxpayers’ money to go to waste on poor value for money projects, which she will not tolerate due to the fact that she wants to take an “iron fist against waste.”
In October, Reeves announced £40bn in tax increases, most of which would affect businesses, and stated that the budget was necessary due to a £22bn “black hole” in public finances left by the previous Conservative government. She previously claimed that she would not have to raise taxes to “top up” public spending. Last week, the Prime Minister declared that he did not intend to keep returning for more funding, but acknowledged that unforeseen circumstances could necessitate a change in plans
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