UK Chancellor Rachel Reeves is expected to announce next Wednesday the largest public spending cuts since the advent of Austerity in 2010.
Her spring statement next week is anticipated to outline reductions in spending across a multitude of government departments, with specific spending plans for individual departments announced at June’s spending review. There are hopes inside the Treasury this will keep Labour aligned with manifesto pledges, with the OBR soon to provide an assessment of Reeve’s promise of a balanced budget and falling debt by 2029-30,
Reeves spending cuts will arrive to a backdrop anxiety over the state of the UK economy, with concerns growing over increased government borrowing costs and stubbornly weak economic growth. The UK Government borrowing costs have risen significantly, reaching their highest levels since the banking crisis of 2007-2008.
The cuts to government departments are compounded by DWP Secretary Liz Kendall’s announcement of £5billion in cuts to welfare spending, primarily from disability payments. There are fears growing amongst critics of Labour’s spending plans that these cuts will exacerbate the UK’s existing inequalities and provide additional strain to its public services.
The Institute for Fiscal Studies has said departments such as the Home Office and local government could already see their budgets fall by around 7% over the current parliamentary term.
Economists fear that these cuts will come at a time when public services are already under considerable strain. Departments have been asked to prepare existing models for a 20% reduction in day-to-day spending, impacting infrastructure projects such as the Lower Thames Crossing Road tunnel.
Many Labour MPs are concerned that these cuts will alienate them from their traditional support base who had hopes of increased investment in public services. Richard Burgon, Labour MP for Leeds East, told the Commons during PMQs last week that disabled people in his constituency were “frightened” of the cuts impact. The Resolution Foundation found that disabled people could lose up to £10,000 a year by 2030 under new welfare spending plans.
Reeves is expected to defend her announcement through the lens of a changing economic outlook. She will point to global economic instability such as Donald Trump’s tariff plans and weaker than expected growth narrowing the fiscal wiggle room in her possession.
