Rachel Reeves is expected to unveil significant spending cuts in next week’s Spring Statement, as she seeks to plug a hole in the nation’s finances without resorting to further tax hikes.
The Chancellor is expected to announce billions in cuts across Whitehall departments, with reductions of up to 7% over the next four years—a move economists warn will deliver a fresh blow to already struggling public services.
Ministers have already begun slashing welfare payments, with £5 billion of cuts revealed last week—most of which will hit disabled people.
One government source told the Guardian: “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, and Liz Kendall [the Work and Pensions Secretary] has made reductions to welfare payments.”
Another insider 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.”
The cuts come as Reeves struggles to fill a fiscal black hole of between £15 billion and £20 billion, following a downgrade in the Office for Budget Responsibility’s growth forecasts.
Labour MPs are growing increasingly anxious that the government’s economic strategy is disproportionately hitting Britain’s poorest families.
Speculation had been rife that Reeves would introduce tax rises as part of an emergency budget. However, it is now believed that any tax changes would be deferred until the Autumn Budget, with Reeves instead opting for broad spending cuts now.
While the Chancellor originally planned for an average 1.3% increase in departmental spending from 2026-27, this is now expected to be slashed to around 1%.
The Institute for Fiscal Studies estimates that reducing spending growth to 1.1% would save roughly £5 billion annually by the end of the parliamentary term.
However, unprotected departments—excluding Health and Defence—could see budget reductions as severe as 11%.
Several Cabinet ministers, including Energy Secretary Ed Miliband, Home Secretary Yvette Cooper, and Justice Secretary Shabana Mahmood, have warned that such deep cuts could jeopardise the government’s key priorities.
The tensions came to a head in what insiders describe as the most “tense” cabinet meeting of this government so far.
The Department for Transport has reportedly drafted plans to slash funding for the Oxford-to-Cambridge rail line—a project Reeves herself confirmed just two months ago. Officials are also exploring private investment options for the long-delayed £9 billion Lower Thames Crossing tunnel.
A transport department spokesperson downplayed concerns, stating: “This is speculation. East West Rail is already well underway with infrastructure now in place on the first phase of the line between Oxford and Milton Keynes.”
Despite mounting criticism, Treasury officials insist Labour’s spending plans remain responsible. “Last year’s budget delivered £40 billion of additional cash into our public services, including the largest real-terms growth in NHS spending outside of Covid since 2010,” a Treasury source said.
“On top of that, we unlocked more than £100 billion in investment into schools, hospitals, and national infrastructure.”
Reeves will announce broad spending figures next Wednesday, but the full breakdown of departmental cuts will not be revealed until the spending review in June. As part of this process, departments have been asked to model potential cuts of up to 20% of day-to-day spending.
Despite pressure from Labour MPs, Reeves has refused to loosen her self-imposed fiscal rules, arguing that to do so would damage market confidence. She pointed to Germany, where borrowing costs soared after Chancellor Friedrich Merz signaled a willingness to ease fiscal constraints.
A similar move in Britain, she warned, would add £4 billion in debt interest payments annually—equivalent to the entire prisons budget.
