by Sir Keir Starmer is facing a backlash from Angela Rayner and her cabinet over “massive” cuts to Department spending to be revealed in the Rachel Reeves Budget.
The Prime Minister has received letters from senior ministers raising concerns about the spending cuts after some spoke out against the measures at a cabinet meeting on Tuesday.
Some departments are facing cuts of as much as 20 per cent as Ms Reeves scrambles to get £40bn of spending cuts and tax rises ahead of the October 30 Budget.
She told ministers during Tuesday’s Cabinet meeting that the plans to plug a £22bn hole in the public finances would only be enough to “keep public services afloat”. After pledging “no return to austerity” under Labour, Mr Reeves is seeking the extra £18bn to fund a cash injection for the NHS and avoid cuts in real terms to some key departments.
Ministers are said to be pushing back against the cuts towards Ms Reeves more than the prime minister as she finalizes her first Budget. Among those who have written to the PM expressing alarm are his deputy Angela Rayner, justice secretary Shabana Mahmood and transport secretary Louise Haigh, Bloomberg reported. Concern is said to be growing across the cabinet, with particular fears among those outside health, defense and education that their departmental spending is not “defended”.
Asked on Thursday if she joined colleagues in writing to the PM ahead of the Budget, education secretary Bridget Phillipson told Sky News: “We’ve all had conversations, meetings and correspondence as part of the normal budget process. I’m not going to get into discussions about meetings or private conversations.”
Former Home Office special adviser and criminal justice commentator Danny Shaw said cuts of up to 20 per cent would be “enormous” for a department such as the Ministry of Justice and would “destroy the criminal justice system in many ways”.
He told BBC Radio 4’s Today program: “It’s hard to see how you could make cuts like that to the Ministry of Justice without affecting the running of the justice system in terms of prison and probation, which account for about half of net spending, and aid legal, which it really is. on its knees at the moment, and also the system of courts and tribunals, which, as we know, is completely blocked.”
Experts have argued that ministers need to find £20 billion to avoid pressure on so-called “vulnerable” departments that their Tory predecessors went into, and billions more to prevent a sharp fall in investment spending.
Part of that could come from changing the measure the government uses to calculate debt, but economists from the Institute for Fiscal Studies have suggested some tax increases are almost inevitable to prevent day-to-day spending cuts.
The dream came as it emerged that Ms Reeves will use her Budget to increase capital gains tax on the sale of shares and other assets but will not change the rate for second homes.
Capital gains on profits from the sale of shares, currently charged at 20 per cent, are likely to rise by “a few percentage points”, The Rising reported, a move that would raise billions. The chancellor is also widely expected to raise the employer’s national insurance rate. A 1p increase in the rate could raise up to £17bn, according to IFS director Paul Johnson.
But the move would be seen as a breach of Labour’s general election manifesto, which promised: “Labour will not increase taxes on working people, which is why we will not raise national insurance.” Ministers argued that the promise only applied to the employee national insurance rate, which sits at 8 per cent, and not the employer contribution rate of 13.8 per cent.
On Tuesday former Bank of England governor Mervyn King, who was Reeves’ boss at the Bank of England, asked the Chancellor to bite the bullet and raise national insurance at the Budget.
In an open letter that published The IndependentLord King told the chancellor to “keep it simple and be brutally honest with the public”.
He warned Ms Reeves against borrowing more to plug the gap in public finances, advising her to turn to national insurance to pay for investment in the economy to boost growth.
Downing Street denied that Sir Keir had given the public the wrong impression about the scale of the tax rises coming under Labour.
Asked if the prime minister had misled voters, his press secretary said: “No. So we stand by our promises in the manifesto, which were fully funded.
“We have been honest with the British public, during the election and since, about the scale of the challenge we would face.
We were honest with the British public, during the election and since, about the scale of the challenge we would face
the Prime Minister’s press secretary
“Then, of course, one of the first things the chancellor did when we came in was to audit the books and he found a £22 billion black hole that the previous government had lied about and covered up.
“That is why we are continuing to be honest with the British people that there will be difficult decisions in this Budget, and that is because of the mess the Conservatives have left of the economy.”
The Treasury has been contacted for comment.
