Rachel Reeves has been warned she could face a double rebellion over the Budget if she pushes ahead with even deeper cuts to public services as well as axeing the winter fuel allowance for pensioners.
It was reported that the Chancellor has asked several Whitehall departments – including health and education – to find “savings” of up to £1bn to help fill the £22bn black hole she says Labour inherited from the Tories.
This plan would go further than the £3.2bn of cuts across Whitehall announced in July when she revealed the extent of the government’s public finances crisis.
The Department of Health has been asked to find £1.3bn of savings before the 30 October Budget, while the Department for Education is one of a number being asked for £1bn, The Times reported.
Health and education were notionally protected from cuts under the austerity programme of David Cameron and George Osborne’s government – although their budgets did face a squeeze in real terms over several years.
The Treasury declined to comment on the figures but said that “tough decisions” were necessary to fix the economy.
The Chancellor risks further anger from the left of the Labour Party after she pledged to work with big business to “co-design” policies on growth for the Budget.
Jonathan Ashworth, former Labour MP and shadow cabinet minister, said he believed Ms Reeves considered herself an “iron chancellor” and would not “back down” in the face of growing dissent from backbenchers, over spending cuts and the planned cuts to winter fuel payments for all but the poorest pensioners.
But he told the Political Currency podcast: “There’s lots of new Labour MPs walking around Parliament who are really, really happy, on cloud nine because they’ve reached their dream job, and I don’t take that away from them, they should be happy.
“But the mood is going to change quickly when they’re faced with voting for something a lot of their constituents don’t support or are emailing them about. So it’s going to be interesting to see how these new Labour MPs cope with that.”
Mr Ashworth predicted that there would be “even harsher” cuts to welfare than previously thought, with possible changes to universal credit eligibility. i understands such changes have been ruled out by the Treasury.
He added: “That’s just my speculation. I’ve got no inside knowledge on that, but if they’re talking about further difficult choices on welfare to come down the line, we know that is never easy for Labour MPs.”
Earlier this week Sir Keir Starmer warned that the Budget was going to be “painful” for the country.
The Unite union has called the planned cuts “austerity mark 2”.
A Treasury spokesperson said: “We do not comment on leaks. But the Prime Minister and Chancellor have been clear that we are having to take tough decisions now to repair the public finances after we inherited a £22bn black hole from the previous government. By fixing the foundations of our economy we can rebuild Britain and make every part of the country better off.”
Ms Reeves met business leaders collectively for the first time on Thursday since becoming Chancellor and said she would work with them to “co-design” policies on growth for the Budget.
They included representatives of the Confederation of British Industry, British Chambers of Commerce and the Federation of Small Businesses.
The Treasury said the talks “ushered in a new era of business partnership”. The closer working will also involve consulting with business on Labour’s Plan to Make Work Pay, which includes offering employees more rights for flexible hours and to switch off in evenings and at weekends.
Following the meeting, Ms Reeves said: “Under this new Government’s leadership, I will lead the most pro-growth, pro-business Treasury in our history – with a laser focus on making working people better off.
“That can only happen by working in partnership with businesses: big, medium and small. I want to continue the strong partnership we built with business in opposition now we are in Government to deliver on our shared goal of fixing the foundations of our economy, so we can rebuild Britain and make every part of the country better off.”
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