Angela Rayner and Rachel Reeves are at loggerheads over a major programme of social housebuilding, in the latest sign of cabinet tensions over this month’s budget.
Rayner, the housing secretary, has been pushing Reeves, the chancellor, for billions of pounds more for affordable housing, which she argues will be needed to hit Labour’s target of building 1.5m new homes across five years.
Sources say, however, that Reeves has made it clear that there will not be enough money available in this spending review for an immediate cash injection.
The standoff is the latest sign of the tensions across cabinet over both the budget and spending review, with several cabinet ministers yet to sign off on their individual departmental settlements.
Rayner is understood to have stressed to the chancellor that social housing should not just be seen as do-gooding but as a key part of the government’s growth agenda.
She told a panel during the Labour conference last month: “I actually think it’s a moral mission with the Labour government to recognise the problem and to build the social housing we need … But hopefully at the spending review, you’ll see that this government is really serious that we’re going to build those houses we desperately need.”
Treasury sources say, however, that they are not able to accommodate every department’s demands given the tight spending constraints.
A Downing Street spokesperson said on Thursday: “Not every department will be able to do everything they want to. There will be tough decisions taken, there will be tough conversations, but ultimately, this government has been very clear that it will fix the foundations.”
A Treasury spokesperson said: “No final decisions have been made but as the chancellor set out in July, the government is taking action to get Britain building again including building 1.5m homes over the next five years.”
The row over social housing comes against a backdrop of broader government tensions over Reeves’s demands for departmental cuts to fix what she says is a £22bn shortfall in the public finances. The Guardian revealed earlier this month that some departments were being asked to cut as much as 10% of their capital budgets, despite Reeves’s promise of more infrastructure spending in the long term.
Rayner is one of three cabinet ministers who have written to the prime minister protesting against what is being demanded of them in this year’s spending review, alongside the transport secretary, Louise Haigh, and the justice secretary, Shabana Mahmood.
Sources have told the Guardian that Rayner had asked for an immediate top-up to the affordable homes programme, a government scheme which allocates £11.5bn to local authorities and housing associations over five years.
The programme is due to expire in 2026, but sources in the housing industry said it was already running out and needed an immediate boost of up to £2bn. They pointed out that Michael Gove handed back nearly that amount to the Treasury last year after struggling to find projects to spend it on.
Kate Henderson, the chief executive of the National Housing Federation, said: “To deliver affordable and social housing at the levels needed, at the autumn budget we need … an urgent top-up in affordable housing funding, and commitment to a new multi-year affordable housing programme which prioritises funding for social rented homes.”
Polly Neate, the chief executive of Shelter, said: “This government was elected on a promise to deliver the biggest increase in social housing in a generation. The only way to do this is through serious investment and by recognising housing as fundamental to communities and growth and counting it as critical infrastructure.”
Government insiders said that while the chancellor had ruled out an immediate top-up to the programme, she had not made a decision on how large it should be after 2026.
Housing industry groups say that hitting the government’s annual housing targets would mean building 90,000 social-rent homes a year for the poorest households, at a cost to the government of about £11bn. However, lobbying groups admit they would be happy to settle for closer to £4bn a year – double the current allocation.
Reeves is likely to make that decision at next year’s multi-year spending review, sources indicated.
The row over housing is merely the latest indication of a spending review process which has infuriated some around the cabinet table. Many are angry about having to make in-year cuts to capital spending budgets, given Reeves is committed to increasing infrastructure spending in the long term.
Ministers are upset not only over the cuts being asked of them, but also a perceived lack of communication from the Treasury. One departmental source said: “Essentially when you get to them, all you hear back is the lines to take.”
Both MPs and cabinet ministers are said to feel particular frustration with the inscrutability of Darren Jones, the chief secretary to the Treasury. “You can get in a room with Darren which you think is going to be a conversation and he just says essentially, thank you for your thoughts which have been noted,” a cabinet source said.
Treasury sources said Reeves and Jones had engaged regularly with MPs and Whitehall officials, and had made changes to some of their original plans because of the consultation process.
They also dismissed any suggestions that this spending review process had been any more fractious than previous ones. “It’s totally normal, happens every time,” one source said. Another dismissed the letters as “the usual theatre” that accompanied such talks.
