Spending Review: Massive cheques from the chancellor for some - but what do totals hide?

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14 hours ago

The next few days are vital – "one of the last moments to weave it all together – to look politically credible to the people Labour has lost", one senior figure reckons.
There have been huge fights inside government about the looming Spending Review.
As I write, the home secretary and deputy prime minister are both still in dispute with the mighty Treasury over the amount of cash they'll have to spend.
But the Treasury's already trying to convince the public the review is about significant investment.
On Wednesday Rachel Reeves boasted of funnelling billions more taxpayers' cash to big transport projects outside the wealthier south east of England, having tweaked the Treasury rules to do it.
Now, with five days still to go, I've been passed some of the information that'll be in the pages of Wednesday's review.
It's one crucial chart that will be in the huge bundle of documents heading to the printing presses on Tuesday night that shows what's called TDEL – the Total Departmental Expenditure Limit.
In other words, the total that government spends, including the day-to-day costs of running public services and long-term spending on big projects.
But it doesn't include costs that government can't set in advance – like pensions and benefits, or debt interest.
The chart spans 2010 to 2030, so takes in the coalition years, where you can see the total sliding down, then the Conservative years when spending starts rising after the Brexit referendum, then leaps up during Covid.
And then, when Labour took charge, the red line going up steeply at first, then more slowly towards the end of this parliamentary term.
The total real terms spending by 2029-30? More than £650bn – roughly £100bn more than when Labour took office.
The pale blue line is what would have happened to spending if the Conservatives had managed to hang on to power last year.
The government now is allergic to accusations that any cuts they make will be a return to austerity. And this chart shows that overall spending is going up considerably, compared to those lean years.
The political argument around spending will rage but the chancellor did - to use the ghastly technical term – set out the "spending envelope" in her autumn Budget, indicating rises were coming.
You can bet they'll want to use every chance they have to say they are spending significantly more than the Tories planned to under Rishi Sunak.
The government's political opponents on the other hand, may look at that red line as it climbs steeply upwards and say: "See, public spending is ballooning out of control".
This chart does illustrate very significant rises in public spending. But be careful. What this chart doesn't give us is any idea of how those massive totals break down. Massive chunks will go to favoured departments, suggestions of an extra £30bn for the NHS today.
And a very significant part of that steep rise will be allocated to long-term projects, not running public services, some of which are struggling.
The overall total may be enormous, but a couple of parts of government greedily suck in billions - others will still feel the pain.
A case in point – as I write on Saturday morning, the Home Office is still arguing over its settlement, believing there isn't enough cash to provide the number of police the government has promised, while the front pages are full of stories about the NHS receiving another bumper deal.
So observe this big health warning. The chart gives us a sense of the political argument the chancellor will make.
But it doesn't tell the full story or give the crucial totals, department by department, decision by decision.
It's worth saying it's incredibly unusual to see any of this before the day itself, hinting perhaps at jitters in No 11 about how the review will be received.
Until we hear the chancellor's speech, and then see all of the documents in full on Wednesday, the story of the Spending Review won't be clear.
There will be reams of statistics, produced by government, and the official number crunchers, the OBR, and then days of analysis by think tanks and experts in the aftermath.
But bear in mind these three core facts. Rachel Reeves will put a huge amount of cash, tens and tens of billions, towards long term projects. Short-term spending money will be tight, with no spare cash for sweeteners. And the government is not popular, so there's huge pressure to tell a convincing story to try to change that, not least because of what went wrong the last time.
"We can't ever do it like this again." After Labour's first Budget, government insiders concluded next time, it had to be different.
A source recalls: "It was a very brutal exercise - it was literally just making the sums add up, there was no collective approach to what the priorities were."
Alongside a lot of extra cash for the NHS, there was a big tax rise for business that came out of the blue. No one wants a repeat of that experience.
The "next time" is now – and a Labour source warns the review might be as "painful as hell" .
So the task for a government struggling in the polls is to make this moment more than just a gruesome arithmetic problem, instead, to use the power of the state's cheque book to make, and go on to win an argument.
Stick a fiver on Rachel Reeves referring back to that first Budget as "fixing the foundations" of the economy and public services, this week then being the moment to start, "rebuilding Britain".
Sources suggest she has three aspects in mind: security for the country (which will explain all those billions for defence), the health of the nation - that does what it says on the tin, and "investing", all that cash for long-term projects.
Next week's decisions will be followed soon after by the government's industrial strategy which will promise support for business, possibly including cash to help with sky-high energy costs.
And it comes after several big staging posts – the immigration white paper, trade deals, the defence review.
In government circles there's hope of denting some of the criticisms that they have been slow to get moving in office, that, frankly, Sir Keir Starmer arrived in government without having worked out what he really wanted to do.
One Whitehall insider tells me, "Now the buses are all arriving at once – maybe the idea of this lacklustre government that didn't have a plan will be blown away by July?"
Another Labour source suggests the threat from Nigel Farage has actually forced the government to get moving, visibly, and decisively: "Reform gives us the impetus to actually shake this stuff down."
That's the rosy view of how the chancellor might be able to play a difficult hand. It might not be reality. It is profoundly uncomfortable for a Labour government to make cuts.
There is already a whiff of rebellion in the air over ministers' welfare plans. Expanding free school meals for kids in England seems designed to placate some of those critics in advance, but there could be more to make them mutinous.
Don't forget Reeves has several different audiences – not just the public and her party, but the financial bigwigs too.
This time last year all Labour's schmoozing was paying off, and she enjoyed good reviews in the City.
One year on, that mood has shifted, in part because of the autumn budget.
According to one city source, it "damaged her. People saw it as an about turn on her promises. Raising National Insurance, however they want to present it, went against the spirit of the manifesto… confidence in her in the City is diminished and diminishing", not least because there is chatter about more tax hikes in the autumn budget.
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You probably don't need me to remind you that the level of taxes collected by government are historically sky high.
So too, at the other end, is the amount of government debt. A former Treasury minister told me this morning, "debt is the central issue of our time, nationally and globally".
"There is a real risk our debt becomes unsustainable this Parliament, unless we make tough choices about what the state does. We can't keep on muddling through."
Add in the twists, tariffs and tantrums of the man in the White House, that make the global economic situation uncertain and the picture's not pretty.
But politics hinges on finding advantage in adversity. Polling suggests much of the country reckons Labour inherited a bad hand and has played it badly.
This week, the chancellor has a chance to change the game. No 11 is determined to prove that she has made decisions only a Labour chancellor would make.
And Reeves is gambling that her decisions to shovel massive amounts of money into long term spending helps the economy turn, and translates into political support well before the next general election.
A senior Labour source said, Wednesday will be "the moment, this government clicks into gear, or it won't". There's no guarantee.
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