Whitehall departments will have to find savings of 5% as Rachel Reeves promised to use an “iron fist” to squeeze government waste.
The Chancellor and Treasury Chief Secretary Darren Jones have begun work on a sweeping multi-year spending review which will be published in 2025.
Ms Reeves said she had “no doubt” departments would be able to identify the necessary savings so spending could instead be focused on the Government’s priorities.
But the Treasury acknowledged that would inevitably mean “difficult” decisions – suggesting the axe would fall in areas which were not part of Sir Keir Starmer’s “missions” for government.
The Chancellor, visiting a Kent hospital on Tuesday, said: “I have no doubt that we can find efficiency savings within Government spending of 5% and I’m determined to do so.
“Because it’s through finding those efficiency savings that we will have the money to spend on the priorities of the British people.
“So part of this spending review will be cracking down on waste, cracking down on non-priority spending, so that we can focus on the issues – whether that is improving living standards, ensuring our streets are safe, or indeed reducing waiting times in the NHS.
“Those are the people’s priorities, and that is what we will be focusing on in the spending review.”
Every pound of departmental spending would face a “line-by-line review”, with external experts brought in to scrutinise budgets.
Launching the next phase of the review, Ms Reeves said: “The previous government allowed millions of pounds of taxpayers’ money to go to waste on poor-value-for-money projects. We will not tolerate it; I said I would have an iron grip on the public finances and that means taking an iron fist against waste.”
Under the Treasury’s plans, departments will ensure budgets are examined by “challenge panels” of experts including former bosses from Lloyds Banking Group, Barclays Bank and the Co-operative Group.
These panels, which would also involve think tanks, academics and the private sector, would advise on which spending “is or isn’t necessary”, the ministry said.
Shadow Treasury chief secretary Richard Fuller said: “Delivering value for money for the taxpayer is a noble goal, but Rachel Reeves’s record so far has been to dole out inflation-busting pay rises to Labour’s union paymasters whilst mandating nothing in return, and making no reforms to public sector productivity or welfare spending.”
