Rachel Reeves is planning to wait until June before announcing how much money Whitehall departments will get for the next three years, as officials warn it could take up to six months to agree budgets with individual cabinet ministers.
The chancellor previously said she would unveil the spending review in the spring, but people close to the process say that has now been pushed back until early summer in anticipation of complex and potentially fraught negotiations.
One person informed of the process said: “This was supposed to be done in spring but they’ve realised as they’ve started talking to ministers that it could be a much longer, more complex process.”
Government officials denied that the review had been delayed, saying they had always been aiming to publish it between May and July. A government spokesperson said: “At the budget, the chancellor confirmed that the second phase of the spending review would conclude in late spring – we are still on track to deliver this.”
Reeves announced a one-year spending review at last month’s budget, allowing departments to plan until 2025-26.
As a result of that review, certain departments received significant real-terms rises in their budgets, including health which was given an additional £25bn over the next two years, equivalent to a rise of 3.8% above inflation. Others saw theirs cut substantially, including the Home Office where the budget is set to fall 2.7% in real terms, and the Department for Transport which received a 2.5% cut.
The process of agreeing that one-year review was occasionally fractious, with several cabinet ministers writing to Keir Starmer protesting against the cuts they were being expected to provide.
The Guardian revealed last month that cabinet ministers were particularly unhappy about being asked to make capital spending cuts of as much as 10% in an effort to find immediate savings, though in the end the Treasury found money for most departments to increase their capital spending.
Officials are preparing for similarly difficult debates across Whitehall in advance of next year’s review, which is being seen as more important because it will set budgets that cannot be revisited until 2029.
Under current Treasury assumptions, budgets for day-to-day spending will rise on average by 1.5% above inflation. But much of that money will be given over the next two years to protected departments such as health and defence, leaving others facing cuts across the next spending review period.
The Office for Budget Responsibility said in October that the plans from Reeves would mean cuts of 1.3% on average for unprotected departments from 2025-26 until 2028-29. Experts have said that could damage certain already-stretched public services such as courts, border control and local government just before the next election.
The Institute for Government published a briefing paper this month entitled “Austerity postponed?” in which its experts said: “Spending is heavily front-loaded. Current plans beyond 2025-26 once again imply cuts to unprotected departments, which will make it difficult for some services – local government and the criminal justice system in particular – to improve before the next election.”
