Latest news with #SpendingReview
Yahoo
17 hours ago
- Business
- Yahoo
Tough choices on public spending unavoidable, says IFS
Tough choices are "unavoidable" as the government finalises spending plans for areas ranging from the NHS and defence, to schools and the criminal justice system, a think tank has warned. The Institute for Fiscal Studies (IFS) said the level of spending on health would dictate whether cuts were made to so-called unprotected areas – those outside of the NHS, defence and schools. It added while funding increased sharply in 2024 for transport, net zero, hospitals, schools and prisons, it would no longer increase year on year, given the government's commitments. The government said the Spending Review on 11 June would "scrutinise every single pound the government spends". The review will outline day-to-day departmental budgets over the next three years and investment budgets over the next four. Whitehall insiders have told the BBC they expect it will be "ugly", and that ministers have been fighting over winning small amounts of cash for their respective departments. There are concerns with the government that plans, such as increasing police numbers in a bid to halve violence against women and girls, might not be allocated enough cash. There are also discussions over continued funding for capping bus fares. Chancellor Rachel Reeves's stance on ruling out borrowing more money and not raising taxes again has led to strong speculation spending cuts will be made. 'It's going to be ugly': Westminster braces for Spending Review Reeves says UK 'beginning to turn corner' as growth beats forecasts The IFS said the government had "front-loaded" its spending over the course of the parliament term in the first couple of years, which meant spending would slow down. "The consequences of this decision must be confronted," the IFS warned. When it comes to daily spending on public services, the think tank suggested a "huge amount depends on the generosity" of cash handed to the NHS - which accounts for 39% of day-to-day departmental spending - as well as defence. NHS spending is planned to be £202bn in 2025-2026, the IFS said, which could pull funding from other areas as the government prioritises reducing patient waiting times and improving access to dental care. "Increasing health funding at anything like the historical average rate would mean imposing real-terms cuts on other 'unprotected' departments," the think tank said. It said this would prove challenging, especially given the government's ambitions to improve the criminal justice system and to deal with prison overcrowding. The IFS added the level of health spending was "in some sense, the central trade-off for the Spending Review" and one that would only become starker if defence spending was increased further or faster than currently planned. Bee Boileau, a research economist at IFS, said the Treasury faced "some unavoidably tough choices". "After turning on the spending taps last autumn, the flow of additional funding is now set to slow to more of a trickle," she said. The government has committed to increasing spending on the army and its estates, and announced it would cut the foreign aid budget to increase military spending to 2.5% of national income by 2027. "Giving more to defence means, all else equal, bigger cuts to something else," the IFS said. In October, Chancellor Reeves changed a self-imposed debt rule, freeing up billions for her to spend on long-term projects such as roads and energy infrastructure, but the IFS warned "not everything can be a priority for further increases". It said questions remained about "whether the trade-offs will be confronted rather than wished away". To continue to improve public services under tight restraints, the IFS suggested the government could improve productivity, thereby allowing it to deliver the same, or better services within lower budgets. But that would be a challenge. The ONS reported in 2024 that productivity in public services is currently below pre-Covid pandemic levels. A government spokesperson said it was "delivering what matters for working people – cutting hospital waiting lists, getting control of our borders and tackling the cost of living". The IFS warned choosing to cut public sector pay has led to strikes in the recent past, so keeping pay flat would "pose serious challenges". It concluded that cuts to public services would not be impossible to make, but would be challenging and require "ruthless prioritisation".
Daily Mirror
2 days ago
- Business
- Daily Mirror
Rachel Reeves to splash billions in North and Midlands under major rule change
Chancellor Rachel Reeves is expected to reprioritise funding outside of London and the South East - with tens of billions of pounds of investment in road, rail and green energy projects Rachel Reeves is preparing to divert billions of pounds of investment into the North and the Midlands by rewriting key Treasury rules. The Chancellor will use next month's Spending Review to reprioritise funding outside of London and the South East of England - unlocking tens of billions of pounds of investment in road, rail and green energy projects. She recently told The Guardian she was planning "£113bn more in capital spending than the plans we inherited" from the Tories. It comes amid alarm from Labour MPs over the threat from Reform UK in their heartlands and the prospect of cuts to day-to-day spending in unprotected Whitehall departments. Treasury value-for-money rules assess investment in areas where the economy is already doing well as having the biggest impact on growth. Critics say the rules in the so-called Green Book bake in a bias towards the South East, favouring an expansion of the Tube to a tram network in a northern city. But Ms Reeves committed to review these rules earlier this year, with the announcement expected alongside the Spending Review in mid June. Speaking in January, she said: 'As the metro mayor of Liverpool, Steve Rotherham, has called for, we will review the Green Book and how it is being used to provide objective, transparent advice on public investment across the country, including outside London, and the South East. This means that investment in all regions is given a fair hearing by the Treasury that I lead.' Boris Johnson ordered a review of the rules to allow an infrastructure boom in the North of England in a bid to cling onto Red Wall voters that backed the Tories in the 2019 election. But the changes never materialised. This week, Keir Starmer said Nigel Farage's party was Labour's biggest electoral threat and dismissed the Tories as "sliding into the abyss". On a visit to St Helens, the PM said Reform's economic plans risked a repeat of the market mayhem caused by Tory PM Liz Truss. Mr Starmer said: "He [Farage] set out economic plans that contained billions upon billions of pounds of completely unfunded spending, precisely the sort of irresponsible splurge that sent your mortgage costs, your bills and the cost of living through the roof. It's Liz Truss all over again." Reform's local election performance has sparked jitters in both Labour and Tory circles after the party seized control of 10 English councils and won the Runcorn and Helsby by-election by just six votes. However officials pushed back on the idea that the Chancellor's plans were a response to Reform - pointing to Ms Reeves's commitment to a review in January.
Wales Online
2 days ago
- Business
- Wales Online
Winter fuel payment: Options to reintroduce the benefit for millions of households
Winter fuel payment: Options to reintroduce the benefit for millions of households The decision to make the Winter Fuel Payment available only to those who claim pension credit last year meant those claiming the benefit fell by almost 90% and saved around £1.5 billion a year, the Institute for Fiscal Studies (IFS) estimates An update on Winter Fuel Payments is likely within the next few weeks (Image: undefined via Getty Images ) Plans on whether to restore Winter Fuel Payments for more pensioners could be unveiled as early as next month, Angela Rayner recently hinted. The Deputy Prime Minister said an update may be likely in the Spending Review, scheduled for June 11. In a highly controversial move the Labour UK Government previously limited the annual payment of up to £300 to only those receiving certain means-tested benefits, such as Pension Credit or Universal Credit. It was in an effort to address a £22 billion 'black hole' in the public purse. However, with the UK's economic prospects improving, Sir Keir Starmer expressed his desire to reinstate the payments to "more pensioners" at the next "fiscal event". Below we have outlined a number of possible outcomes that could be announced on June 11 to help you know what to expect. These include anything from a full reversal to expanding entitlement to recipients of certain benefits. For money-saving tips, sign up to our Money newsletter here . Full reversal One option on the table could be to completely overturn the move that removed the benefit from countless pensioners Taking back the decision to restrict it to only those who are eligible for pension credit the previous year resulted in a nearly 90% drop in those claiming Winter Fuel Payment and led to an annual saving of roughly £1.5 billion, according to the estimations by the Institute for Fiscal Studies (IFS). Reinstating the policy change from last year would extend eligibility to an additional 11 million households and naturally erase the £1.5 billion in savings. Introduce a designated threshold for Winter Fuel Payments Introducing a bespoke threshold and means-testing system would offer an avenue for households that don't qualify for Pension Credit to request Winter Fuel Payments. Lifting the bar 20% higher than the Pension Credit limit would bring about an expenditure of nearly £100 million and make payments accessible to about 400,000 extra families, as per the data from the Resolution Foundation. An alternative approach could take inspiration from Child Benefit by letting all pensioner households apply, but then necessitating those with income above a specific tier to reimburse some amount through a self-assessment tax return, notes the IFS. However, Tom Waters, associate director at the IFS, has flagged concerns regarding the adoption of "a clunky bureaucratic mechanism for what is, ultimately, a relatively small payment". The Institute for Fiscal Studies (IFS) has estimated that restricting Winter Fuel Payment to only those on pension credit last year led to a nearly 90 per cent drop in claimants, saving about £1.5 billion annually. Reversing the policy change from last year would make an additional 11 million households eligible, effectively erasing the £1.5 billion saved. Introduce a specific income threshold for Winter Fuel Payments Implementing a new income threshold and means test could enable households not receiving Pension Credit to qualify for Winter Fuel Payments. An increase of 20 per cent above the Pension Credit limit could incur a cost of approximately £100 million, extending benefits to roughly 400,000 more families, as per the Resolution Foundation's analysis. One approach could mirror Child Benefit, allowing all pensioner households to claim, but then requiring higher-income recipients to repay some through a self-assessment tax return, as noted by the IFS. However, IFS associate director Tom Waters cautions against the potential pitfalls of "a clunky bureaucratic mechanism for what is, ultimately, a relatively small payment". Widen eligibility to include recipients of disability or housing benefits Expanding eligibility to include those receiving disability benefits could benefit around 1.8 million additional households, with an estimated annual cost of £500 million, according to the IFS. Expanding the Winter Fuel Payment to cover those receiving housing and disability benefits could benefit an additional 1.3 million pensioner households, with an annual cost of £300 million, according to the Resolution Foundation's calculations. Ruth Curtice, the chief executive, described this move as an "affordable" and "sensible way forward". Pay Winter Fuel Payments to individuals, not households Currently, the Winter Fuel Payment is issued per household rather than per individual, which presents a challenge in its distribution. A shift to individual allocation would enable the UK Government to perform means testing on a personal level, utilising existing income tax data. Article continues below This change would allow low-income pensioners with wealthier partners to receive the winter fuel payment. However, this adjustment might result in couples receiving double the amount compared to single individuals, whereas currently, a single person receives the same as a couple in one household.
New Statesman
3 days ago
- Business
- New Statesman
The revolt against Reeves
Photo by Toby Melville -Britain is weary of spending cuts. Mark Rowley, the Metropolitan Police commissioner, has warned that forces bear the 'scar tissue of years of austerity'. Nigel Farage, in his new natalist guise, has called for the abolition of the two-child benefit cap. Cabinet ministers in unprotected departments revolt against the prospect of further cuts. Sources dismiss reports that Angela Rayner and Ed Miliband 'stormed out' of a meeting with Darren Jones, the Chief Secretary to the Treasury ('It was cordial and it was virtual,' insists one insider). But they do not deny the tensions within government ahead of Rachel Reeves' Spending Review. Rayner, tasked with delivering 1.5 million new homes by the end of this parliament, fears this pledge will be impossible to meet without a significant increase in spending on social housing (funding for the affordable homes programme only lasts until next year). She also wants additional support for local government to prevent further council bankruptcies (the number reliant on 'exceptional' support has risen from 18 to 30 over the past year). Other cabinet ministers yet to settle with Reeves include Yvette Cooper, Ed Miliband and Steve Reed – all lead unprotected departments and have their own unenviable targets. At the election, Labour pledged to provide 13,000 more neighbourhood police officers, to halve knife crime and to halve violence against women and girls. It promised to upgrade five million homes to cut energy bills and reduce emissions. And it vowed to 'champion British farming' (post-Brexit subsidies are expected to be slashed). The Spending Review is the moment at which ambition will collide with reality. The Treasury dismisses any talk of a return to austerity. To Labour critics calling for Reeves to raise taxes or loosen her fiscal rules it points out that the Chancellor has already done both. Earlier this week, Reeves boasted that the latter would enable £113bn of new capital investment in homes, transport and energy. But the Chancellor faces two self-imposed constraints. First, though she loosened her rules in one area, she tightened them in another (in a bid to maintain market confidence). Rather than balancing the current budget within five years, Reeves has pledged to do so within three years. This is the target that is now necessitating cuts to unprotected departments. 'Capital spend takes time, and day-to-day spending is still massively tight and constrained,' a minister told me. 'Interventions that will have an impact on voters in the first four years are off the table, and that's what's killing us. Borrowing has gone up but we're not borrowing to do the things that we want to do – we're borrowing to fix the mess of the last lot.' Subscribe to The New Statesman today from only £8.99 per month Subscribe Chancellors caught in such a bind would normally raise taxes, but here Reeves faces her second constraint. She has vowed not to increase income tax, National Insurance (on employees), VAT and corporation tax for the duration of this parliament – the taxes that account for 70 per cent of government revenue. As a consequence, ahead of her next Budget, the Chancellor faces a desperate search for alternatives. U-turns on winter fuel payment cuts and (most likely) the two-child benefit cap only intensify the pressure. Here is precisely why some ministers believe Reeves should have used Donald Trump's inauguration and the rise in UK defence spending to stage an 'economic reset' – loosening her fiscal rules and/or revising her tax pledges. That, both No 10 and No 11 believe, would have carried a high economic and political price. But the risk for Reeves is that she is eventually forced into her own messy reset. This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here Related
Yahoo
4 days ago
- Business
- Yahoo
Starmer's legacy is already in tatters
There are two mysteries at the centre of Keir Starmer's premiership. Does he actually want to be Prime Minister? And, if so, why? These questions are prompted by reports that the Government could reverse course on key election pledges as the Spending Review is set to squeeze departmental budgets. These include recruiting 13,000 additional police, funding 1.5 million social houses, and spending £6.6 billion to insulate five million homes, seen as pivotal to achieving net zero by 2050. Each of these policies was calibrated to appeal to an identifiable demographic in the Labour coalition. Home insulation was targeted at urban professionals concerned about climate change, housebuilding at young graduates unable to get a foot on the property ladder, and extra bobbies on the beat at floating voters who needed to trust that Labour would crack down on knife crime and street robbery. To abandon one of these programmes would be politically damaging. To abandon all three would involve alienating multiple segments of the electorate all at once, for no obvious strategic gain. The backlash, and what a backlash there would be, could prove mortally wounding to the Prime Minister's prospects in Downing Street. Starmer has U-turned on his belief that the category of 'women' can include trans-identifying males. He has pivoted from champion of mass immigration to someone who intones darkly about Britain becoming an 'island of strangers'. He has partially U-turned on the withdrawal of the winter fuel allowance from all but the poorest pensioners and there is talk of a volte-face on the two-child benefit cap. The Prime Minister looks like a man speedrunning the final, fag-end months of a long-serving, intellectually exhausted government. Yet this ministry isn't even a year old. It need not put its case to the country for another four years. The chief priority for a new government is to repay the confidence the voters placed in them. Labour has spent the past 11 months reminding the voters why they kept the party on the opposition benches for 14 years. There is no avoiding the cause of this political dysfunction: Starmer is a dud. The government's landslide majority is built on a shallow mandate of 34 per cent of the vote, but nothing is as politically shallow as the Prime Minister himself. There is almost no substance there, hardly a spasm of policy, and not even a skerrick of principle. It is difficult to discern why he wanted to be Prime Minister in the first place, other than not wanting someone else to hold the office. An enduring but dubious criticism of Tony Blair is that he was nothing more than a spin junkie eager for his latest focus group fix. He undoubtedly paid more attention to public opinion than his predecessors and his Number 10 was stuffed with pollsters and public relations men, but Blair held very definite views about the Labour Party, the role of the state, and the UK's place in the world. You might have disagreed with those views, but they were clear and constant. He stuck to them even as the polls told him to retreat. We can speak of Blairism but we cannot speak of Starmerism because there is nothing there, only vibes and the vagaries of political fashion. He is the archetypal soft-Left Labour politician: good intentions, vague sentiments, hollow ideas, and no imagination or gumption to make anything concrete of any of them. He has all the power he needs to do whatever he wants, but he doesn't know what he wants beyond office itself. Britain is a country without direction led by man without purpose. Nothing will get better until that changes. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
