Rachel Reeves is busier than most, but even she shares the frustrations of punters forced to join one of the seemingly never-ending queues at the Post Office.
The Chancellor, who recently needed to change her address on her driving licence to mark her move to Downing Street, was frustrated with how inefficient the process was. A family member was sent to fetch the DVLA forms for her to fill out and then had to waste time in a Post Office queue of doom to hand them in again. It would have been quicker online.
The Driver Vehicle and Licensing Agency, which currently receives 40,000 letters a day, is one of the organisations the Chancellor has in her sights for an efficiency drive, as she instructs Cabinet colleagues to find 5 per cent cuts to their budgets.
“We run public services at the moment the way businesses ran themselves 10 or 15 years ago,” a Treasury source said. “It’s about catching services up.”
Reeves was “genuinely shocked” the previous administration hadn’t done a line-by-line spending review, an ally told The i Paper. The last “zero-based review” – where a slide rule is run over every decision – was 17 years ago.
In letters which landed with a thump on the desks of Cabinet ministers on Tuesday, Reeves’s deputy Darren Jones told colleagues they need to spend money on the Government’s key priorities, which include targets to improve living standards across the country, and building 1.5 million homes.
The missive also stressed ministers need to be ruthless on ripping out waste and inefficiency, perhaps by digitalisation or collaboration across government. Government sources are keen to underline how the extra £1bn of capital investment in technology, announced at the Budget, can be spent on modernising services by using AI and other wizardry.
Done well, the review could end some of the frustrations with life in modern Britain; for example, having to explain to different bits of the NHS what is wrong with you. With increased efficiency, goes the argument, you won’t need to explain to four different doctors and administrators what should be on centralised notes.
Reeves and Jones want to encourage departments with shared priorities to work in so-called mission groupings or mission clusters. The Government’s priority areas for spending include boosting economic growth, fixing the NHS, fighting crime and investing in clean energy.
For instance, where growth is the key priority, the Treasury will work in a collective with the business, transport and science departments over the next six months to ensure collaboration. The collectives are likely to remain within the existing structure of Cabinet sub-committees, with close oversight from Jones and from Pat McFadden, the Chancellor of the Duchy of Lancaster.
There are already squalls on the horizon. Sir Keir Starmer faced a Cabinet pushback at the last spending round in October when ministers complained of allocations that they felt were too miserly. There are also growing grumblings that Reeves has fallen victim to the Treasury orthodoxy of tight pursestrings and isn’t putting the Government’s political agenda first.
The Chancellor only allocated an average 1.3 per cent real-terms increase in overall departmental spending for the period, so those outside of the priority areas may face cuts. The Office for Budget Responsibility said that between 2025 and 2029 an extra £7bn will be needed to keep pace with inflation.
Reeves also needs to find an extra £10.5bn to get defence spending up to the target of 2.5 per cent of GDP, a commitment it appears increasingly unlikely the UK will achieve. That’s notwithstanding any investment in social care, or upfront cash to fund the NHS transition from hospital to community-based work.
Under the Treasury’s plans, departments will ensure budgets are scrutinised by “challenge panels” of external experts including former senior management of Lloyd’s Banking Group, Barclays Bank and the Co-operative Group. These panels, which will also involve think tanks and academics, will advise on which spending “is or isn’t necessary.”
This has led to bizarre accusations that Reeves is taking a leaf from the Donald Trump playbook and using a series of Elon Musk-style private sector figures to slash and burn the Civil Service. Musk has boasted that he could find more than $2trn in savings – around a third of annual federal government spending.
“I don’t think many people are going to compare me to Donald Trump,” Reeves told the BBC on Tuesday, a sentence few people expected to hear coming from the mouth of the straightlaced Chancellor, least of all herself.
Trump or not, by kicking off the Government’s latest spending review — which will allocate budgets for 2026 onwards, and which is expected to conclude in June – she is likely face stiff opposition as Cabinet ministers go in to bat for their departments.
By borrowing nearly £70bn and effectively maxing out the nation’s credit card, she has effectively set the overall budget and now needs Cabinet ministers to justify decisions within that envelope. That’s after she spent a fortnight apparently boxing herself into a corner by committing to not raise taxes again, only to have to untangle herself again.
Asked again on Tuesday if she could categorically rule out putting up taxes next year, she repeated the form of words that implies she doesn’t want to but may need to.
“I can’t write five years’ worth of Budgets in just the first five months of government, but this was a once-in-a-Parliament Budget that I delivered in October to wipe the slate clean after the mismanagement of the previous government,” she said.
And if not tax rises, then cuts of 5 per cent may be only the start. Greg Clark, the former Conservative chief secretary to the Treasury, pointed out in a post on X he ran a five-year spending review in 2015, asking departments to model 20 per cent and 40 per cent reduction scenarios.
That’s certainly not where Reeves nor the Labour Party want to find themselves towards the end of the decade. It’s the political equivalent of getting to the front of the Post Office queue to find the attendant pulling down the blind.
