Chancellor Rachel Reeves is set to announce the most significant spending cuts since the austerity era in next week’s spring statement, as she seeks to address the UK’s budget deficit without raising taxes. The move has sparked unease among Labour MPs and warnings from economists that the cuts could severely impact key public services.
Reeves will reveal plans to slash Whitehall budgets by billions of pounds more than previously anticipated, with some departments facing reductions of up to 7% over the next four years. The announcement comes just a week after the government unveiled £5 billion in cuts to benefit payments, primarily affecting disabled people. Analysis by the Resolution Foundation suggests that some disabled individuals could lose nearly £10,000 a year in benefits by the end of the decade under these reforms.
Labour MPs fear the additional spending cuts will exacerbate financial pressures on the UK’s poorest families. One Whitehall source acknowledged the challenges, stating, “The government has been clear that departments will have to find more efficiencies. That is why Wes Streeting [the health secretary] has cut NHS England, that is why Liz Kendall [the work and pensions secretary] has made reductions to welfare payments.” Another source admitted, “I don’t know how much longer we can go on pretending this is not austerity, when the reality is we’re making cuts to vital public services such as police and prisons.”
Ben Zaranko, associate director at the Institute for Fiscal Studies (IFS), warned that the cuts could harm public services and those who rely on them. “Even though the pace of cuts would be substantially slower than in the peak austerity years, it would still represent the steepest cuts since 2019,” he said.
The spring statement was initially intended as an update to the Office for Budget Responsibility’s (OBR) economic forecasts. However, the UK’s economic outlook has worsened since last year’s budget, with rising borrowing costs and sluggish growth. While Labour attributes the economic struggles to global turmoil, the Conservatives argue that the downturn stems from the significant tax increases imposed on businesses by Reeves last November.
The OBR will deliver its final forecasts on Friday, assessing whether Reeves is on track to meet her fiscal targets, including balancing the day-to-day budget by 2029-30 and reducing debt by the same timeframe. Government sources have indicated that Reeves will not announce any tax rises next week, despite Conservative claims of a potential stealth income tax raid through frozen thresholds. However, officials have not ruled out such measures later in the year if economic conditions fail to improve.
Reports suggest that Whitehall budgets could increase by an average of 1.1% annually after 2025-26, down from the 1.3% previously announced. With much of this funding allocated to areas like the NHS, schools, and defence, the IFS estimates that other departments—such as justice, the Home Office, and local government—could face annual cuts of 1.9%, amounting to a 7% reduction over the remainder of the parliament.
The upcoming spring statement has reignited debates over the balance between fiscal responsibility and the need to protect public services, with Labour’s promises to reverse years of Conservative-driven austerity now under scrutiny.
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