LONDON — Keir Starmer has staked his future on convincing voters he’ll rebuild the state. First he needs to convince his Cabinet they have the tools to do it.
Members of the prime minister’s top team have been privately sounding the alarm over their ability to deliver on Labour’s manifesto pledges, as Britain’s top finance minister Rachel Reeves prepares to unveil stark spending choices Wednesday.
With a resurgent Nigel Farage zooming ahead in the polls and Labour MPs at Westminster in open mutiny over cuts to disability benefits, there is little appetite among ministers to deliver more bad news to voters.
“There will be trade-offs, and this is definitely the event where the rubber hits the road in terms of which of Labour’s promises are they going to stick to, and which are they not going to be able to keep,” Ruth Curtice, chief executive of the Resolution Foundation think tank, said of the review.
Down-to-the-wire negotiations between ministers and the Treasury were only concluded on Monday, but few predict Cabinet grumbling will cease now the deals have been done — with a tricky autumn budget to come and economic headwinds still blowing across the Atlantic.
“This idea that once they’ve settled, everyone plays nice — there’s no chance,” one figure in close contact with No. 10 said, noting that Reeves remains wedded to tight pre-election spending and tax restraints, meaning more tough choices ahead. Like others in this piece they were granted anonymity to speak about internal discussions.
Spending splurge
It’s not all bad news.
A spate of announcements — from investment in major transport projects to billions of pounds for science, technology and nuclear power — have been unveiled in the run-up to Wednesday’s announcement, giving Labour MPs something to cheer.
Reeves changed Britain’s debt rules last October, paving the way for billions of pounds in additional spending on infrastructure projects.
“I slightly feel like some of my colleagues across the Labour movement are not quite giving the government credit for that,” said Jonathan Ashworth, the outgoing chief executive of the Labour Together think tank.
While there has been a blitz of publicity for this capital investment, day-to-day revenue spending will tell a different story.
Even so, by the end of this parliament the amount of departmental spending will be the same as pre-austerity — the major cost-cutting project embarked on by former Conservative Chancellor George Osborne in 2010, the Resolution Foundation’s Curtice said.
But for every winner there will be a loser — and ministers are bracing for the hours and days after Reeves hits send, as markets and think tanks deliver their verdicts on where the ax has fallen, and the state of U.K. finances.
On their missions
It will be ministers on the front line delivering Starmer’s manifesto pledges who will have their settlements scrutinized most closely.
Starmer’s deputy Angela Rayner — a popular figure among the soft left — was among the slowest to do a deal with Reeves. It was only on Sunday night that she reached a settlement with the Treasury.
It came after a memo in which she argued for a raft of new tax rises was leaked ahead of Reeves’ economic update in March.
Her local government and housing department has been tasked with delivering 1.5 million new homes before the next election — a key promise in Labour’s election manifesto.
The person in close contact with No. 10 quoted above, speaking shortly before she reached a settlement over the weekend, characterized Rayner’s actions as a “pre-emptive strike.”
“She knows that on the delivery front, she’s going to fall short. She’s so closely associated with this 1.5 million target, and that’s just not going to happen,” they said.
It won’t just be about money. Reforms to the planning system will be as crucial to delivering on the 1.5 million homes without hitting the Treasury’s bottom line.
But Rayner’s situation is “in some ways similar to [Health Secretary] Wes Streeting having this massive target on his head to reduce waiting lists,” the person quoted above added. “They’re both very clear, tangible things that have reached popular prominence. One’s got shitloads of money to do it, the other hasn’t.”
Rayner and Streeting have another thing in common — they’re both seen as future leadership contenders when Starmer leaves. “Not getting what you want isn’t actually that bad from a leadership point of view,” said a second person who speaks regularly to ministers and No. 10. “It means you can throw your toys out of the pram and go to your supporters and say ‘I tried.’”
Thin blue line
Home Secretary Yvette Cooper only completed negotiations with the Treasury on Monday after weeks of public warnings from senior police officers about the need for more resources — which senior figures in the Home Office have made no attempts to dampen.
Cooper has been tasked with halving serious violent crime ahead of the next election.
One urban Labour MP said Cooper needed to secure more police funding to see off the threat of Reform in their seat, with parts of the constituency feeling “lawless” amid brazen fare-dodging, shoplifting and tool theft.
“People can just see the state of everything,” the MP said.
Energy Secretary Ed Miliband’s budget will also be under the microscope. There are still said to be private murmurings in No. 10 about how realistic net zero pledges will be.
“I think the net zero stuff will come under pressure, probably towards the end of this year,” said the first person in regular contact with No. 10 quoted above, when the November U.N. COP climate summit in Brazil brings the challenges of net zero back into focus, at the same time more defense spending will have to be found in the budget later this year.
There are still those who brief against Miliband, despite the energy secretary’s apparently securing a good deal in the negotiations, and Starmer’s saying in April that energy security “is in the DNA of my government.”
On the flip side, Cabinet ministers will be under pressure to deliver their reform agenda once their spending totals are locked in.
A third person, who speaks regularly to ministers, said things will get “much more stark and sharp” on this front after this week.
They warned that ministers, who will be publishing long-term policy strategies for such departments as the NHS and industry, must be able to show they have a “long-term vision.”
“If the spending review feels like the same spreadsheet that Rishi Sunak and Boris Johnson used but with different numbers, then we’re in trouble,” that person warned.
Brinkmanship vs. reality
Veterans of Westminster remain skeptical of just how realistic some of the threats are, pointing out that dire warnings of catastrophe have long been a feature of spending reviews, and often come to nothing.
“It’s like you could grid” interventions on defense, education and similar areas, said Ashworth, who was a special adviser under ex-Chancellor Gordon Brown.
“Secretaries of state would come in and claim that whatever settlement the Treasury was working up for them would lead to catastrophe and hell on earth,” he quipped. “This is part of the Whitehall negotiation.”
Or as one Cabinet minister pithily observed: “It’s all steps in the dance.”
But one government official noted that ministers — who have warned the situation is “existential for the delivery of the missions” — “do seem to be quite concerned.” Defense and health have been “hoovering up a lot of capital spend,” the official added.
The Department of Health is expected to emerge as the biggest winner on Wednesday, while Starmer has already set out the biggest sustained increase in defense spending since the Cold War amid NATO pressure for the U.K. to boost its spending.
Reshuffle rumor mill
Crucial to Cabinet unity will be how the spending review lands with his party.
Starmer retains the threat of a reshuffle — a good way of keeping ambitious MPs and rebellious ministers onside until it’s complete. MPs and officials have strongly suspected for months that it will happen in July.
“Once that’s passed, it’s sort of going to be open season — especially as a lot of MPs now are contemplating just being a one-term MP,” said the person in regular contact with No. 10 quoted above.
One senior MP warned, however, that a “significant rump” of MPs are too jaded to be won over even before the reshuffle, due to the quality of Labour’s political engagement.
They said: “If you have never cultivated people into thinking that they’ve got the chance of being on the ministerial ladder, they think, ‘well, it doesn’t fucking matter what I do over here, it doesn’t matter what I say, it doesn’t matter whether I stand up and eat shit when there’s a difficult announcement.’”
Labour MPs also regularly bring up the future of Reeves herself.
“I do think that Rachel has suddenly realized that she’s wildly unpopular in the PLP,” said the same second MP quoted above, who argued her “iron chancellor” image means restive cabinet ministers — not Reeves herself — will get the credit for any extra spending.
Former Conservative Chief Secretary to the Treasury Greg Hands, who was also a chief whip, said: “Spending reviews always go better if the PM and Chancellor are in a strong position. I am not really sure that Keir Starmer, and especially Rachel Reeves, are in that strong a position at the moment, and that makes it slightly more open-field this time around.”
Party welfare
Cuts to welfare will be the biggest test of that.
Ministers are drawing up plans to introduce a bill to parliament next week containing Labour’s controversial cuts to disability benefits, in time for a showdown vote — the “second reading” — in the week of June 30 or later.
One person with knowledge of the plans said the bill was likely to be tightly focused on the cuts, while other welfare reforms will come only later in the year. This will concentrate Labour MPs’ anger, but could also allow the government to classify it as a “money bill” — meaning it would be made law within a month of being sent to the House of Lords even if peers still object.
Officials have also held talks about putting the bill through a “committee of the whole house,” preventing lengthy evidence sessions that could question experts and campaigners. The person with knowledge of the plans argued: “You rip the plaster off, otherwise it just drags out for longer.”
But one Labour official said: “The welfare vote will blow it all up again. I think at least one minister will resign.”
Soul searching
Less than a year into the new Labour government, Starmer is not believed to be in any great danger — yet.
“I think there’s a bit more time” and the Cabinet’s falling apart is not “at that point yet,” the second person who speaks regularly to ministers and No. 10 said.
But they warned: “I think the question that keeps reverberating round is ‘what are we for?’ And there isn’t a single ‘thing’ yet that we can point to, that this is a classic Labour agenda that we’re pushing. … I think if there isn’t something slightly symbolic to point to, people’s patience is going to start getting a bit thin.”
Rupert Yorke, who was ex-PM Rishi Sunak’s deputy chief of staff and a former Treasury adviser, agrees: “We have yet to see the Treasury articulate coherently and compellingly why we are in this situation, why those trade-offs exist, and what their economic and fiscal policy is for.”
“They need to get that right, starting on Wednesday, and ensure they receive the credit for the positive aspects — or it will all be lost ultimately to Reform’s growing benefit,” he added.
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