Ministers fight over scraps as reality bites on spending review

Times

3 days ago

At cabinet on Tuesday morning Sir Keir Starmer expressed his gratitude to ­ministers for their work before next week's spending review.
For several of those sitting round the table the prime minister's words might have rung a little hollow as they grapple with deep cuts to their budgets. The next few days will have far-reaching ­implications for their departments and their political aspirations.
The parlous state of the public finances means that unprotected departments — those outside the Department of Health and Ministry of ­Defence — are facing real-terms cuts in the spending review on June 11.
The run-up to this year's spending ­review, which will set out departmental funding, has been particularly bloody and, with a week to go, three ministers have yet to reach settlements with the Treasury.
Given that the bulk of government departments have now settled, the remaining­ ministers find themselves locked in a battle for an ever-diminishing pool of resources.
They include Yvette Cooper, the home secretary; Angela Rayner, the housing and communities secretary; and Ed Miliband, the energy and net-zero secretary.
Even Wes Streeting, the health secretary, whose funding is ring-fenced and who will enjoy the lion's share of money in the review, has yet to reach a settlement although officials acknowledge that the dispute — over drug prices — is of a ­different order.
Wes Streeting's department of health has its funding ring-fenced
LEON NEAL/POOL/AFP VIA GETTY IMAGES
The negotiations have been tense and there has been an extraordinary level of lobbying, both inside and outside Whitehall.
Reports that Rayner and Miliband stormed out of a meeting with Darren Jones, the chief secretary to the ­Treasury, have been denied but there are claims that secretaries of state are refusing to deal with him and demanding instead to speak to Rachel Reeves, the chancellor, directly.
Rayner, the deputy prime minister, was said to have been left 'very, very frustrated' by the spending review ­process. A source said negotiations with the Treasury became so fraught that she ended up holding meetings past midnight with officials to discuss strategies.
For the ministers still locked in discussions with Reeves, one of the fundamental concerns is that the government is failing to put its money where its mouth is.
Between them they are responsible for delivering some of Starmer's biggest priorities — halving knife crime and violence against women and girls; recruiting 13,000 additional frontline police officers; building 1.5 million homes; and using clean energy to power the electricity network by 2030.
All of these announcements have been repeatedly put up in lights by Starmer, made in a succession of laudatory press releases and speeches and promoted with countless leaflets and social media posts. Ministers now find themselves being asked to deliver on these same pledges with significantly less money.
The tense atmosphere has been ­exacerbated by some extraordinary lobbying.
Last week The Times disclosed that police chiefs and the deputy director of MI5 had written to the government to warn that its plans to ­release thousands of prisoners early posed a risk to public safety.
On the same day seven police chiefs including Sir Mark Rowley, the head of the Metropolitan Police, wrote an article in The Times warning that failing to increase their budget would put ­Starmer's pledges at risk and represent a return to austerity.
They have since gone further. On Friday Rowley and other police chiefs cut out Cooper and Reeves and wrote to Starmer directly, saying negotiations between the Home Office and Treasury were going 'poorly' and that they faced stark choices about which crimes to deprioritise­. For a law-and-order prime minister, their letter is unlikely to have gone down particularly well.
The challenge for Starmer is that ­behind their warning lies a tacit threat. Should they be unable to deliver on ­Labour's promises, they are willing — both publicly and privately — to point the finger of blame at government.
It is a similar story in other departments. Green groups and charities are alarmed by proposed cuts to Miliband's £13.2 billion warm homes plan. Farmers are raising the alarm over plans to slash a big land management scheme. ­Developers are warning that the failure to invest in affordable housing will lead to homebuilding targets being missed.
The ministers will all ultimately ­settle — they have no choice in the matter. But the process itself points to the fact cabinet is increasingly emboldened in questioning the chancellor.
While Reeves was once arguably the dominant figure in Starmer's Labour, she is now a relatively diminished one after a public backlash over the decision to scrap the winter fuel allowance. The prospect of further tax rises has not helped matters.
A government source said: 'The word that keeps coming up about Rachel is 'captured' — people think she's just been absorbed by the Treasury orthodoxy. There's no imagination. There's no theory of growth.' This is categorically rejected by allies of Reeves, who say the spending review will be focused on improving living standards.
At the root of the problem is that, after two years of relatively generous spending fuelled by big tax rises, Reeves is now determined to apply the squeeze. Real-terms spending will grow by an average of 1.2 per cent a year over the three-year spending review period, well down on the 2.5 per cent over Labour's first two years.
But ministers have already promised a big increase in defence spending and if the NHS budget increases in line with the long-term average of 3.5 per cent, then other departments face real-terms cuts of 1 per cent a year. The Institute for Fiscal Studies has warned it will be ­'impossible' to fund all the priorities without 'chunky tax increases'.
Reeves does have a good news story to tell. She will use her budget to ­announce £113 billion of capital funding, including investment in 'shovel-ready' transport and infrastructure projects in the regions to fend off Reform UK.
There will also be an announcement on Sizewell C, a nuclear power plant in Suffolk that will produce enough energy to power six million homes, and the green light for mini nuclear reactors.
But officials acknowledge that the cuts will dominate the headlines. In a week's time the battles that have raged behind the scenes will be laid bare in black and white.
The winners and losers who emerge from this fraught process could have a defining role in Labour's prospects at the next election, for better or worse.