Cabinet Ministers Challenge Chancellor's Cuts Before Budget Announcement

Cabinet ministers are voicing strong opposition to the chancellor's proposed cuts to their departments in the upcoming budget. Several ministers have reached out to Keir Starmer, expressing their concerns about the potential impact of these cuts, particularly on unprotected sectors like housing and transport.

The chancellor, Rachel Reeves, is reportedly aiming to implement £40 billion in tax increases and spending cuts, despite her earlier commitments to boost investment for economic growth. This has led to frustration among ministers who are being asked to propose significant reductions in capital projects.

Reeves has indicated that the £22 billion funding shortfall inherited from the previous Conservative government is only sufficient to maintain current public services, without any improvements. As she prepares to unveil her first budget in two weeks, she has assured the cabinet that there will be no return to austerity measures under her leadership.

Key Takeaways

• Cabinet ministers are contesting proposed cuts to their departments.

• Rachel Reeves aims for £40 billion in tax rises and spending cuts.

• Concerns are particularly focused on housing and transport sectors.

• The government faces a £100 billion funding gap over the next five years.

• Labour has ruled out raising income tax, VAT, or national insurance for individuals.

The chancellor's plans come amid a backdrop of economic challenges, with the government acknowledging a £100 billion funding gap in public finances over the next five years. During a recent political cabinet meeting, Reeves highlighted the necessity of addressing this gap while maintaining essential services.

The prime minister's spokesperson reiterated the government's commitment to transparency, stating that the public was informed about the challenges ahead during the election campaign. The spokesperson also pointed to the £22 billion funding shortfall as a significant factor influencing the current budgetary decisions.

In light of Labour's manifesto commitments, ministers are exploring alternative revenue-raising strategies. Potential measures include increasing employers' national insurance contributions and levying national insurance on pension contributions. However, the government has clarified that its promise not to raise national insurance applies only to individuals, not businesses.

Starmer has been cautious in his responses regarding potential national insurance increases, acknowledging the tough decisions that lie ahead in the budget set for 30 October. Business leaders have expressed concerns that raising national insurance contributions would effectively act as a "tax on jobs," further complicating the economic landscape.

Paul Johnson, director of the Institute for Fiscal Studies, commented on the scale of the proposed tax rises, suggesting that £40 billion would be unprecedented. He noted that while some of this could be managed through adjustments in fiscal rules, a significant portion would still necessitate addressing income tax.

Recent economic data has shown a drop in inflation, with the consumer prices index falling to 1.7% in September, down from 2.2% in August. This development may influence the government's approach to fiscal policy as it navigates the complexities of the upcoming budget.

As the chancellor finalises her budget plans, the tension between maintaining public services and addressing the funding shortfall remains a critical issue for the government. The outcome of these discussions will have far-reaching implications for various sectors and the overall economic strategy moving forward.

Sources

• Cabinet ministers contest chancellor’s planned cuts to their departments | Autumn budget 2024 | The Guardian, The Guardian.