RACHEL Reeves is set to unveil the biggest spending cuts "since austerity" in next week's Spring Statement.
The Guardian reports that the Chancellor intends to cut Whitehall budgets by billions of pounds more than previously expected, in a move which could mean reductions of as much as 7% for certain departments over the next four years.
It comes after Work and Pensions Secretary Liz Kendall announced £5 billion in cuts to the welfare budget, with a huge number of people now set to be denied the disability benefit Personal Independence Payment (PIP).
One Whitehall source told the Guardian: "The Government has been clear that departments will have to find more efficiencies. That is why Wes Streeting [the Health Secretary] has cut NHS England, that is why Liz Kendall has made reductions to welfare payments.”
Another said: “I don’t know how much longer we can go on pretending this is not austerity, when the reality is we’re making cuts to vital public services such as police and prisons.”
Ben Zaranko, associate director at the Institute for Fiscal Studies (IFS), said: “The Government will be hoping that the short-term cash injection provided last year, and efficiency improvements as public services continue to recover from the pandemic, will be enough to deliver service improvements even if money is tight.
“But we’re in a very different world to 2010 and, even though the pace of cuts would be substantially slower than in the peak austerity years, it would still represent the steepest cuts since 2019.
“It is difficult to see how this could be delivered without some adverse impacts on public services and those who rely on them.”
Government sources told the Guardian that Reeves will not announce any tax rises next week, but that she has not ruled out making such a move later in the year if the economy continues to struggle.
Officials have not denied reports that they could seek to increase Whitehall budgets by an average of 1.1% a year after 2025-26, rather than the 1.3% announced last year.
Given that much of this money will be taken up by expected rises to budgets in areas such as the NHS, schools and defence, the IFS calculated this would mean other departments – such as justice, the Home Office and local government – falling by about 1.9% a year, or 7% over the rest of the parliament.
On Wednesday, Reeves is expected to announce the average level of spending across Whitehall over the next few years, but will not reveal what it means for individual departments until the spending review in June.
As part of the spending review process, departments have been asked to model cuts of up to 20% of day-to-day spending.
The cuts Reeves will unveil next week are likely to cause further unease among Labour MPs, many of whom have expressed discontent with recent cuts to international aid and welfare.
One MP told the Guardian: “Increasingly I’m trying to figure out what we’re doing that the Tories wouldn’t be if they were in power.”
The Chancellor will deliver the Spring Statement on March 26.
