The revelation comes after a tricky period for cabinet relations during which multiple ministers went over the chancellor’s head to write directly to Prime Minister Keir Starmer to protest cuts to their areas….reports Asian Lite News
Chancellor Rachel Reeves said she’s reached agreement with all of her UK cabinet colleagues on their spending allocations for next week’s budget, following tensions with some senior ministers over cuts planned for their departments.
In a BBC interview, Reeves referred to a Treasury tradition whereby balloons representing each government department were inflated and stuck to the wall of the office of her deputy, Chief Secretary to the Treasury Darren Jones, ahead of budget talks, before being popped when settlements were reached. “All you need to know,” Reeves told BBC Radio 5 Live, “is there are no balloons left in the chief secretary’s office.”
The revelation comes after a tricky period for cabinet relations during which multiple ministers went over the chancellor’s head to write directly to Prime Minister Keir Starmer to protest cuts to their areas.
Angela Rayner, the deputy prime minister and housing secretary, did not reach agreement with the Treasury on spending for her department until late on Friday night, two days past the allotted deadline.
“I’m very sympathetic towards the mess that my colleagues have inherited”, Reeves said, referring to the £22 billion (S$37.7 billion) fiscal black hole she says the previous Conservative administration left behind. “But any additional money, in the end, it has to be paid for either by taking money from other departments or raising taxes.”
Addressing reports of cabinet dissent, Reeves said it was “perfectly reasonable that cabinet colleagues set out their case – both to me as chancellor and to the prime minister, about the scale of the challenges that they find in their departments.” She described the past week as “a really constructive process.”
As she prepares to deliver Labour’s first budget in 14 years, Reeves is planning a mix of tax rises and short-term spending restraint as part of a push to raise as much as £40 billion to plug the budgetary void and fund her party’s priorities – including the National Health service and longer-term infrastructure projects.
Reeves said she remained committed to election promises not to raise income tax, national insurance and value added tax for working people, but added “we do need to look at other taxes to make sure that the sums add up.”
“We do need to find additional money,” Reeves said. “There will be more difficult decisions to come on spending on welfare and taxation, and I’m not going to pretend otherwise.”
Reeves to announce major change to fiscal rules
Reeves will announce at the International Monetary Fund a plan to change Britain’s debt rules that will open the door for the government to spend up to £50bn extra on infrastructure projects.
After weeks of speculation, the chancellor will confirm at the fund’s annual meetings in Washington on Thursday that next week’s budget will include a new method for assessing the UK’s debt position – a move that will permit the Treasury to borrow more for long-term capital investment.
The change to the debt rule will be welcomed by the IMF, which says spending on UK infrastructure projects should be ringfenced as the government seeks to repair the damage to the public finances caused by the pandemic and the cost of living crisis.
Reeves will not specify while in Washington which of the various debt measures under consideration has been chosen, but the Guardian has been told by a senior government source that she will target public sector net financial liabilities (PSNFL).
This yardstick – which will replace public sector net debt – will take into account all the government’s financial assets and liabilities, including student loans and equity stakes in private companies, as well as funded pension schemes.
This would give the chancellor room to increase borrowing for investment in long-term infrastructure. Reeves said before leaving for the IMF on Wednesday: “A Britain built on the rock of economic stability is a Britain that is a strong and credible international partner.
“I’ll be in Washington to tell the world that our upcoming budget will be a reset for our economy as we invest in the foundations of future growth. It’s from this solid base that we will be able to best represent British interests and show leadership on the major issues like the conflicts in the Middle East and Ukraine.”
Labour inherited a set of fiscal rules from Reeves’s predecessor, Jeremy Hunt, dictating that day-to-day spending be met by revenues and that debt as a share of the economy must be falling in the fifth year of forecasts produced by the Office for Budget Responsibility.
Hunt was only narrowly on course to meet his debt rule, by £8.9bn, after announcing large tax cuts despite spending pressures linked to Britain’s high debt servicing costs, ballooning demand on public services and weak economic growth.
Had Hunt adopted a PSNFL target in March, it would have added about £53bn to his borrowing headroom.
The Treasury has hinted that it would not initially take advantage of all the extra scope that a change to the debt rule would provide and would put “guard rails” in place to ensure investment projects deliver value for money. Sources said energy and transport projects would be a particular focus of capital spending in the budget on 30 October.
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