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Chancellor Rachel Reeves has wrapped up “grim” public spending talks with ministers, however they’ve left a bitter aftertaste in Whitehall and warnings that extra native councils might be pushed into efficient chapter.
Reeves mentioned on Wednesday that every one cupboard ministers had agreed a spending settlement for the 2025-26 monetary yr, with the outcomes to be introduced alongside her October 30 Price range.
“I’m very sympathetic towards the mess that my colleagues inherited,” Reeves mentioned, however some ministers imagine the Treasury failed to understand the extreme issues going through some public providers.
One authorities official mentioned day-to-day public providers had been being squeezed, with native councils anticipated to be badly hit. “There’s acute pressure,” mentioned one, predicting that extra native authorities might be pressured into “Section 114” emergency measures.
Since 2018, eight native authorities have needed to challenge Part 114 notices, that are required when councils imagine they’re on monitor to breach their authorized obligation to steadiness the books year-on-year.
Essentially the most high-profile latest casualties final yr had been Nottingham and Birmingham Metropolis councils, however the Native Authorities Affiliation, which represents native authorities in England, has warned that many extra are in danger.
A December 2023 survey of councils by the LGA discovered that one in 5 council chief executives feared they had been liable to needing to challenge a Part 114 discover within the subsequent two years.
Chief amongst councils’ monetary pressures is the spiralling price of offering social care and short-term housing after many years of real-terms cuts in council budgets, mixed with inflation growing the price of delivering providers.
Reeves and her chief secretary Darren Jones wrapped up talks with ministers on the finish of final week, however solely after some cupboard members appealed on to Prime Minister Sir Keir Starmer to intervene.
“Clearly there’s some real dismay and anger but equally a recognition that the backdrop is very challenging,” mentioned one authorities official. One other confirmed the negotiations had been “grim”.
Reeves informed Radio 5 Dwell’s Matt Chorley that Jones had adopted a Treasury custom by popping a balloon each time a departmental minister agreed to the brand new spending plan. “There are no balloons left in the chief secretary’s office,” she mentioned.
She added: “It’s 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 they may find in their departments. It has been a really constructive process.”
The chancellor mentioned she had requested departments to seek out financial savings by “clamping down on waste, on the use of consultancies in government, looking at procurement to make sure we drive value for money”.
Reeves has vowed to “end Tory austerity” in future years and is planning an enormous rise in taxes in her Price range to guard Whitehall departments from having to make real-terms cuts later within the parliament.
The chancellor is trying to shut a funding hole of about £40bn to inject cash into day-to-day public spending, with a view to masking all present spending with tax revenues inside 5 years.
