Sir Keir Starmer is facing a backlash from Angela Rayner and her cabinet over “major” cuts to departmental spending to be announced in Rachel Reeves’ Budget.
The Prime Minister has received letters from senior ministers expressing concern about the spending cuts after some spoke against the measures at Tuesday’s cabinet meeting.
Some ministries face cuts of up to 20 per cent as Ms Reeves scrambles to find £40 billion in spending cuts and tax rises ahead of the October 30 Budget.
He told ministers at Tuesday’s Cabinet meeting that his plans to plug the £22bn gap in the public finances would only be enough to “keep public services afloat”. Ms Reeves, who vowed “there will be no return to austerity” under Labor, is seeking £18 billion in additional funding to provide a cash injection into the NHS and avoid real-terms cuts to some key departments.
Ministers are said to be more vocal than the prime minister over the cuts to Ms Reeves, who is putting the finishing touches on her first budget. According to Bloomberg, among those who wrote letters to the Prime Minister expressing their concerns are his deputy Angela Rayner, justice minister Shabana Mahmood and transport minister Louise Haigh. It is said that concerns have spread throughout the cabinet, and that fear has increased, especially in segments other than health, defense and education, whose ministry expenditures are not “protected”.
Asked on Thursday whether she agreed with colleagues writing to the Prime Minister ahead of the Budget, Education Minister Bridget Phillipson told Sky News: “We have all had discussions, meetings and correspondence as part of the regular budget process. “I will not get into a debate 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 “devastating” for a department like the Ministry of Justice and would “destroy the criminal justice system in many ways”.
He told BBC Radio 4 Today program: “It is difficult to see how you can make such cuts in the Department of Justice without affecting the functioning of the justice system in terms of prisons and probation and legal aid, which account for about half of net spending. “The courts and the judicial system are currently on their knees and also, as we know, completely clogged.”
Experts have argued that ministers must find £20bn to avoid the squeeze on so-called “vulnerable” ministries that their Conservative predecessors had written about, and billions more to prevent a sharp drop in investment spending.
Some of this could be due to 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 avoid cuts to day-to-day spending.
The backlash came as it emerged Ms Reeves would use her budget to increase capital gains tax on the sale of shares and other assets but would leave the rate on second homes unchanged.
Capital gains from profits from the sale of shares, currently taxed at 20 per cent, are likely to rise by “a few percentage points”. Times It was reported to be a move that would raise billions of dollars. It is also widely expected that the Chancellor will increase the national insurance rate for employers. A 1p increase in the rate could add up to £17bn, according to IFS director Paul Johnson.
But the move will be seen as a breach of Labour’s general election manifesto, which promised: “Labour won’t increase taxes on workers, so we won’t increase national insurance.” Ministers argued that this promise only applied to the national insurance employee rate of 8 percent, not the 13.8 percent employer contribution rate.
On Tuesday, former Bank of England governor Mervyn King, Ms Reeves’s boss at the Bank of England, called on the Chancellor to bite the bullet and increase national insurance in the Budget.
In an open letter published by IndependentLord King told the chancellor to “keep it simple and be brutally honest with the public”.
He warned Ms Reeves against higher borrowing to plug the gap in public finances and advised her to use national insurance to pay for investment in the economy to boost growth.
Downing Street denied Sir Keir had given the public the wrong impression about the size of tax increases Labor would implement.
To the question of whether the Prime Minister misled the voters, the press secretary responded as follows: “No. Therefore, we stand behind our commitments in the fully funded manifesto.
“We have been honest with the British public about the scale of the challenge we will face both during and after the election.
We have been honest with the British public, both during and after the election, about the extent of the challenges we will face.
Prime Minister’s press secretary
“Then, of course, one of the first things the chancellor did when we arrived was to go through the books and find a £22bn black hole that the previous government had lied about and covered up.
“That’s why we’ve continued to be honest with the British people that there will be difficult decisions in this Budget, and that’s because of the mess the Conservatives have left the economy in.”
Treasury was contacted for comment.