Rachel Reeves is gearing up for a major fight with trade unions who warn they will not stand by and allow a second age of austerity in the UK.
With serious concerns that the chancellor plans a severe squeeze on departmental budgets to balance the books, union bosses fear a new round of pay freezes and thousands of job losses.
In an ominous warning about a potential wave of strikes if pay demands are not met, one leading trade union leader, Steve Wright of the Fire Brigades Union (FBU), told The Independent: “Workers struggling to afford the basics will not accept falling living standards from Labour.”
Another senior trade union source at one of Britain’s largest trade unions also warned: “There’s a growing sense of tension, anger, despondency. The cuts that the government is talking about will affect workers and communities.
“If the government thinks it has resolved public sector pay with last year’s deal, then it’s a long way from reality and that pressure will continue to build. I wouldn’t say that workers will walk out immediately, but that pressure is not going away.”
The threats are a far cry from the early days of Sir Keir Starmer’s government after the election on 4 July last year when Labour ushered in bumper inflation-busting pay rises across the public sector.
Since then, a lack of economic growth, made worse by a decision to hike national insurance in the so-called jobs tax, has left Ms Reeves with very little room for manoeuvre when she delivers her spring statement on Wednesday.
Already, Ms Reeves has said she intends to cut 10,000 civil service jobs and Sir Keir has announced plans to save £45bn by replacing workers with artificial intelligence.
But she and Sir Keir are now facing a trade union-led backlash, with support from left-wing Labour MPs calling for a new wealth tax instead of departmental cuts. It comes after growing anger over plans to slash benefits by £5bn, which will see more than one million people lose out.
Privately, trade unions are warning of a return of picket lines with industrial action if pay demands are not met this year.
While many are awaiting the details of Ms Reeves’s spring statement before going public, others have sent warning shots on the eve of her appearance in the Commons.
FBU general secretary Mr Wright said: “Under George Osborne and his successors, austerity Budgets led to attacks on wages, pensions and public services.
“It would be wrong and misguided for Rachel Reeves to adopt the same approach. Workers struggling to afford the basics will not accept falling living standards from Labour.
“Labour must make funding available for substantial pay increases in the fire service and across the public sector. There must be no cuts in the chancellor’s spring statement. Instead, Rachel Reeves must introduce a wealth tax to fund public services and deliver a decent pay rise for workers.”
Unison general secretary Christina McAnea said: “While the chancellor has little room for manoeuvre, squeezing already hard-pressed departmental budgets isn’t the answer.”
Former TUC president Matt Wrack, who is in the running to be the next general secretary of the NASUWT teachers’ union, added: “After 14 years of austerity, people voted for change in 2024. They now want change delivered through investment in schools, hospitals and other public services.
“Workers’ wages have fallen for too long and living standards need a boost. Further austerity would be a big mistake.”
Eddie Dempsey, RMT general secretary, said ahead of the spring statement: “The chancellor needs to identify with the needs of working-class communities and tackle the structural issues of wealth distribution which at the moment favour the super-rich.
“The Office for Budget Responsibility is set to downgrade growth forecasts, increasing pressure to cut public spending to meet self-imposed fiscal rules. But the real issue is not growth, it is about who benefits from it.
“For four decades, wealth has been funnelled to corporations and away from supporting our public sector and working people in general.”
Going in heavily on a boost to defence spending, the chancellor is set to warn the country and her detractors on the left that “the world has changed” in the last six months since her October Budget.
The message was relayed to 100 Labour MPs ordered into No 10 on Tuesday to get their lines from Treasury chief secretary Darren Jones, ahead of what many people are describing as an “emergency Budget”.
One Labour MP described briefings they had been given on the statement as an attempt to “soak up the aggro” amid anger over cuts and a return to austerity last seen in 2015 when George Osborne was chancellor.
In her statement, the chancellor will vow to bring about “security and national renewal” as she delivers a spring statement to kickstart economic growth, protect working people and keep our country safe.
The chancellor will warn that “we have to move quickly in a changing world”, unveiling a significant step towards spending 2.5 per cent of GDP on defence with £2.2 billion funding boost next year.
She will announce a further £2.2bn funding increase for defence from April, as she warns that Britain has to “move quickly in a changing world”.
The funding will be invested in advanced technologies so that Britain’s armed forces have the tools they need to compete and win in modern warfare.
This includes guaranteeing the investment to fit Royal Navy ships with Directed Energy Weapons by 2027, that can hit a £1 coin from 1km away and take down drones from 5km away.
It will also be used to provide better homes for military families by refurbishing the defence estate – including over 36,000 rental homes brought back into public ownership.
The funding will also unlock rapid preparatory work, such as site surveys, planning and architecture, for the major redevelopment of armed forces housing through the Defence Housing Strategy.
The investment will also help fund upgrades to infrastructure at His Majesty’s Naval Base Portsmouth, securing its ability to support Royal Navy operations into the future.
Ms Reeves is expected to tell MPs: “This government was elected to change our country. To provide security for working people. And deliver a decade of national renewal.
“That work of change began in July – and I am proud of what we have delivered in just nine months.
“Restoring stability to our public finances; giving the Bank of England the foundation to cut interest rates three times since the General Election; rebuilding our public services with record investment in our NHS and bringing down waiting lists for 5 months in a row; and increasing the National Living Wage to give 3 million people a pay rise from next week.”
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