THE Chancellor has warned that “public spending is not sustainable” as she told government departments to make billions of pounds of cuts in advance of the Budget.
According to The Times, Rachel Reeves is setting out detailed savings targets which “really scrape the bone” in Whitehall after the Prime Minister warned of “painful” further spending cuts to come.
It has been reported that several departments are understood to have been told to find more than £1 billion in savings each, with others instructed to find hundreds of millions of pounds as part of a cost-cutting drive.
It comes after Keir Starmer (above) asked voters to “accept short-term pain for long-term good” while Reeves warned that “much work is needed to rebuild the foundations of our economy”.
“Unless we grow the economy, we’re going to continue to be in a situation where taxes are at too high a level and public spending is not sustainable.
“We’ve got to break out of this doom loop,” Reeves said.
Reeves has repeatedly refused to rule out raising inheritance tax or capital gains tax, commenting that she was “not going to write a budget two months ahead of delivering it”.
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The Times reports that the Department of Health has been asked to find savings worth around £1.3bn in time for the October Budget while officials at the Department for Education are also looking at how to absorb around £1bn of savings.
The UK Government has already faced criticism for announcing cuts to the Winter Fuel Payment, which will now no longer be universal.
Another Whitehall department has been told by the Treasury to find £1bn in cuts while redundancies and hiring freezes are being considered, one source told The Times.
One source told the newspaper: “We’re all being asked to really scrape the bone in terms of what other cuts might need to be considered – it is properly grim.”
A spokesperson for the Treasury meanwhile told The Times that it “does not comment on leaks or speculation”.
“The Prime Minister and Chancellor have been clear that this government is having to take tough decisions now to repair the public finances after it inherited a £22bn black hole,” they said.
“By fixing the foundations of our economy we can rebuild Britain and make every part of the country better off.”
Reeves said she was making “difficult decisions in very challenging circumstances” as both she and Starmer have been forced to defend the cuts to the Winter Fuel Payment.
However, Ben Zaranko of the Institute for Fiscal Studies has said there was “very much continuity from what the Conservatives were doing” in terms of the demand for savings.
He added that, after years of austerity, “there is a whole load of core state functions it’s hard to see how you make big savings from”.
“The danger for the government is that you end up having lots of big arguments about small sums.
“If you want to start saving big, you’ve got to say what the state is going to stop doing – you could charge tuition fees on sixth form education, there’s no reason why you couldn’t means-test the state pension to avoid targeting money at the richest pensioners.
“If you want to save big sums you have to start touching some unpopular stuff.”
Reacting to the reports, SNP MSP Stuart McMillan said: "Be in no doubt, the continuation of Tory austerity, which Labour repeatedly denied throughout the election campaign despite repeated warnings from the SNP and others, is a political choice.
"The director of the respected IFS, Paul Johnson, has this week described Labour's decision to follow Tory fiscal rules as 'daft'.
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"The SNP are focused on ending child poverty, supporting economic growth, improving public services and tackling the climate emergency. But our ability to serve the people of Scotland is under real threat due to the cuts Keir Starmer's Labour government is making following on from 14 years of Tory austerity.
"Ultimately it is only with the full powers of independence that Scotland can be free from the impact of spending decisions taken at Westminster."
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